<PAGE>
Registration No. 333-29635
Filed under Rule 424 (b) (3)
PROSPECTUS UNAPIX ENTERTAINMENT, INC.
4,245,975 Shares of Common Stock
156,718 Class B Redeemable Common Stock Purchase Warrants
--------------------------------------
The securities of Unapix Entertainment, Inc. of (the "Company"), to which
this Prospectus relate include: (i) 3,732,309 shares ("Derivative Shares") of
the Company's common stock, $.01 par value per share (the "Common Stock"), and
9,500 Class B Redeemable Common Stock Purchase Warrants ("Class B Warrants"),
to be issued upon exercise or conversion of certain of the Company's derivative
securities (the "Derivative Securities"), more particularly described in "Plan
of Distribution" (such Class B Warrants issuable upon exercise of Derivative
Securities are referred to as "Derivative Class B Warrants"); (ii) 513,666
shares of Common Stock to be offered by certain persons (see "Selling Security
Holders") that were acquired by them in private placements of such shares in
connection with the acquisition by the Company of Miramar Images, Inc. and the
merger of A Pix Entertainment, Inc., ("A Pix") with and into the Company (the
"Selling Security Holder Shares"); and (iii) 147,218 Class B Warrants (the
"Selling Security Holder Class B Warrants") to be offered by certain persons
(see "Selling Security Holders") that were acquired by them in private
placements in connection with (i) investments in a joint venture to fund the
acquisition by A Pix of distribution rights, (ii) the waiver of certain rights
with respect to an entertainment project, and (iii) services being rendered to
the Company (the Selling Security Holders Shares together with the Selling
Security Holder Class B Warrants are referred to as the "Selling Holder
Securities"; the Derivative Shares, Derivative Class B Warrants together with
the Selling Security Holder Securities are referred to as the "Securities").
Each Class B Warrant expires on June 22, 1998, and entitles the holder to
purchase 1.05 shares of Common Stock for $4.50 (i.e. at an exercise price of
$4.28 per share). The exercise price of the Class B Warrants is subject to
adjustment in certain events pursuant to the antidilution provisions thereof.
The Class B Warrants are redeemable at a price of $.10 per Class B Warrant,
prior to their expiration, provided that (i) prior notice of not less than 30
days is given to the Class B Warrant holders; (ii) the closing high bid price of
the Common Stock on each of the 20 consecutive trading days (or such lesser
number of days with the consent of the underwriter in the Company's initial
public offering, but not fewer than 10 consecutive trading days) ending on the
third day prior to the date on which the Company gives notice has been at least
$5.70; and (iii) Class B Warrant holders shall have exercise rights until the
time and date fixed for redemption.
The Selling Security Holder Securities may be sold from time to time by the
Selling Security Holders, or by pledgees, transferees or other successors in
interest, on the American Exchange (or such other exchange on which the
Securities are listed at the time of sale), or in the over-the-counter market or
otherwise, at prices and on terms then prevailing or at prices related to the
then current market price, or in privately negotiated transactions. See "Plan
of Distribution."
Additionally, this Prospectus has been prepared for use, with the prior
consent of the Company, by certain holders of the Securities who may acquire the
Securities and who may wish to sell such Securities in transactions in which
they may (because of their relationship to the Company) be deemed to be
underwriters within the meaning of the Securities Act of 1933 (the "Act").
This Prospectus also relates to such additional Securities which may be
issuable pursuant to anti-dilution provisions of the Derivative Securities which
Securities are being registered hereby pursuant to Rule 416 promulgated under
the Act.
Other than proceeds equal to the exercise price of certain of the
Derivative Securities when exercised, the Company will receive no cash proceeds
from the distribution of the securities offered hereby. The Common Stock and
the Class B Warrants are primarily traded on the American Stock Exchange
("AMEX") under the symbols "UPX" and "UPX.WS.B.," respectively. On June 13,
1997 the closing price for the Common Stock and the Class B Warrants on the AMEX
was $4.4375 and $.875, respectively.
SEE "RISK FACTORS" PAGE 3 FOR CERTAIN MATTERS TO BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 21 , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza,
Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549; and at the regional
offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, in Washington, D.C. 20549, at prescribed
rates. In addition, such reports and other information may be electronically
accessed at the Commission's site on the World Wide Web located at
http://www.sec.gov. The Company's Common Stock and Class B Warrants are listed
on the American Stock Exchange, 86 Trinity Place, New York, New York 10006, and
reports, proxy statements and other information filed by the Company can also be
inspected at the office of such exchange.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto referred to herein as the "Registration Statement") under
the Act, with the Commission covering the shares of Common Stock being offered
by this Prospectus. This Prospectus does not contain all the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered by
this Prospectus, reference is made to the Registration Statement and the
exhibits and schedules thereto which are on file at the offices of the
Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to are not necessarily complete, and are qualified in
all respects by such reference.
__________________________
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR THAT PERSON TO MAKE AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE UNDER THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION
THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-11976)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, as filed and as amended.
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1997.
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3. The description of the Securities as set forth in a Registration
Statement Form 8-A, as filed with the Commission on July 27, 1995,
together with any amendments or reports for the purpose of updating
such description.
4. All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15 of the Exchange Act prior to the termination of
this offering shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of filing
thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modified or superseded such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
part of the registration statement or this Prospectus for purposes of the Act.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon written or oral request of that person, a copy of all
documents incorporated by reference into this Prospectus, other than exhibits to
those documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be directed to Unapix
Entertainment, Inc., 200 Madison Avenue, New York, New York 10016, Attention:
Michael R. Epps, General Counsel (telephone (212) 252-7600).
THE COMPANY
The Company is primarily a worldwide licensor and distributor of feature
films and television programs, principally for the television market (including
free and pay television, cable and satellite) and the home video market
(including video cassette and laser discs). The Company's current "library" of
films and programs includes feature films, documentaries, children's
programming, educational and special interest programming, musical concerts,
comedy shows, adventure series, and classic films and serials (the
"Properties").
Prior to 1993, the Company primarily focused on the international
distribution of older Properties. During 1993, the Company expanded its
activities to exploit the increasing worldwide demand for television programming
and home video products resulting from the fractionalization of the television
viewing audience. A shift has occurred from mass audiences dominated by a few,
free broadcast networks to niche audiences served by diverse cable, satellite
and free television services, home video cassettes and other products.
In order to capitalize on this evolution, during 1993 the Company
implemented a plan to expand and diversify the Company's business into areas of
domestic and foreign licensing, and domestic home video cassettes and laser disc
distribution of newer Properties, including properties that are designed to
appeal to a specific segmented audience. The Company has continued its
expansion and diversification in each subsequent year by adding a significant
number of newer Properties to its Library.
In March 1997, the Company completed the acquisition of all of the capital
stock of Miramar Images, Inc. ("Miramar"), which produces and distributes music
videos and audio recordings primarily for the New Adult Contemporary Market,
i.e., products that are designed principally to appeal to individuals over the
age of 25.
Currently, in addition to Miramar, the Company's operations consist
principally of the following: the distribution of video cassettes to domestic
home video rental stores via sales to wholesalers, which is conducted by A Pix
Entertainment ("A Pix"); the distribution of Properties from the Company's
library to foreign broadcasters and home video rental companies, which is
conducted under the name of Unapix International; the licensing of Properties to
the North American television market, which is conducted under the name Unapix
North America; and the marketing of products that are intended to be purchased
by consumers which is conducted by Unapix Consumer Products. During 1996,
approximately 56% of the Company's revenues were attributable to A Pix.
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The Company was incorporated in Delaware on January 7, 1993 and is the
successor to Majestic Entertainment, Inc., which was incorporated in California
on January 6, 1986 and which was merged into the Company on March 23, 1993. The
address of the Company's executive offices is 200 Madison Avenue, New York, New
York 10016. The telephone number at that location is (212) 252-7600.
RISK FACTORS
The Securities offered hereby involve a high degree of risk. Prospective
investors should carefully consider, along with the other information contained
herein, the following risk factors before purchasing any Securities offered
hereby:
1. NATURE OF THE ENTERTAINMENT INDUSTRY. The entertainment programming
and audio compact disc and tape distribution business involves a substantial
degree of risk. The success of a product depends upon unpredictable and
changing factors such as competition and audience acceptance, which may bear
little or no correlation to the Company's production and other costs. Audience
acceptance of the Company's products represents a response not only to the
artistic components of the products, but also to the level of advertising and
promotion by the distributor and availability of alternative forms of
entertainment and leisure time activities, general economic conditions and
public taste, and other intangible factors, all of which change rapidly and
cannot be predicted with certainty. In addition, as a result of the Company
increasing its resources to film and television product earlier in its
production and acquisition stages, the possibility always exist that the
finished product may be different from that which was initially envisioned.
Therefore, there is a substantial risk that some or all of the Company's
products may not be commercially successful, resulting in costs not being
recouped or anticipated profits not being realized.
2. CAPITAL INTENSIVE INDUSTRY; ADDITIONAL FINANCING REQUIREMENTS. The
entertainment programming and audio compact disc and tape distribution and
licensing industry is capital intensive and requires significant expenditures of
funds to establish a library of Properties from which revenues may be generated.
The Company could be dependent upon future financing in order to compete more
effectively in the marketplace. The Company's cash requirements have been and
will continue to be significant. If additional funding is unavailable to the
Company when needed, the Company could be required to curtail significantly one
or more aspects of its operations and the Company's business and financial
condition could be materially adversely affected. See Paragraph 7 below.
3. COMPETITION. The Company currently competes with other television and
home video licensing and distribution companies as well as other recording
companies, including many of which have longer-standing relationships in the
industry, significantly greater financial resources and more extensive libraries
than the Company. There can be no assurance that the Company will be able to
compete successfully against these other companies.
4. SHIFT IN STRATEGY. Although members of management of the Company
have prior experience in film production, the Company has recently increased its
involvement in film and television production activities with respect to which
the Company has a limited track record. This shift in strategy toward an
increased emphasis on motion picture production and acquisition may increase the
rewards available to the Company, but may increase the risks as well.
5. DEPENDENCE UPON THE ACQUISITION OF RIGHTS TO PROPERTIES. The
Company's business is dependent upon the acquisition of distribution rights to
additional Properties in order to increase its library and thereby increase its
ability to generate revenues. The Company's opportunity to acquire rights to
additional Properties is limited by its financial resources, the suitability of
available Properties to the Company's business
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focus and competition from similar companies.
6. INCOME FORECAST; BASIS OF PRINCIPAL ASSETS; POSSIBLE FLUCTUATION IN
OPERATING RESULTS. Included in the Company's assets at December 31, 1996 are
unamortized film costs of $17,048,000 which include costs incurred for the
production, acquisition and distribution of its Properties and other rights
acquired from third parties. Amortization of these costs is based on the
"individual film forecast method" of accounting. This method, which is
prescribed by generally accepted accounting principles and is standard practice
in the entertainment industry, requires management to project future revenues to
be generated by the Company's Properties and to amortize the costs of the
Properties based on the percentage that revenue recognized bears to total
projected revenues. There can be no assurance that management's projection of
future revenues will be realized. Moreover, if the Company subsequently
determines that future revenues will be less than originally projected, an
adjustment would have to be made in the carrying value of deferred costs which
could materially affect operating results reported in the period such adjustment
is made. Accordingly, there may be significant fluctuation in quarterly
financial results reported by the Company as a result of such adjustments.
7. OUTSTANDING CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS. There are
currently 5,764,590 shares of Common Stock outstanding. In addition, 504,668
shares of Common Stock are issuable upon conversion of outstanding shares of the
Company's Series A 8% Cumulative Convertible Preferred Stock ("Preferred Stock
A"), 3,793,000 shares of Common Stock are issuable upon exercise of outstanding
Common Stock purchase warrants, 2,377,375 shares of Common Stock are issuable
upon the exercise of outstanding Common Stock purchase options granted to
employees of, and consultants to, the Company, 57,750 shares of Common Stock are
issuable upon exercise of outstanding options to purchase Preferred Stock A and
the conversion of the shares of Preferred Stock A acquired upon the exercise
thereof, and 1,605,000 shares of Common Stock are issuable upon conversion of
$7,222,500 principal amount of 10% Convertible Subordinated Notes due June 30,
2003.
Furthermore, (i) $3,025,000 principal amount of Variable Rate Senior
Subordinated Notes are currently outstanding, half of which (for a limited
period of time during 1998) are convertible, at the holder's option, into shares
of Common Stock at a conversion rate based upon the market price of the Common
Stock during the last sixty (60) trading days of 1997, (ii) Robert Baruc, the
President of A Pix, is entitled to receive 200,000 shares of Common Stock as a
result of the merger of A Pix with and into the Company, and (iii) the Company
has a stock option plan currently permitting the issuance of up to 600,000
shares of Common Stock, under which approximately another 160,000 options could
be granted, (the Board has authorized an increase in the number of shares
issuable under the plan by 275,000 shares, subject to stockholder approval).
In addition, the Company is currently offering to a select group of
accredited investors up to 20 units ("Units") of its securities, each priced at
$250,000 and consisting of: (i) a $250,000 principal amount 10% Convertible
Subordinated Note due June 30, 2004, convertible into Common Stock at a price of
$5.00 per share (a "Note"); and (ii) warrants to purchase 25,000 shares of
Common Stock at an exercise price of $6.00 per share expiring June 30, 2004
("Warrants"). The Notes and Warrants, and the shares of Common Stock issuable
upon the conversion or exercise of the Notes and Warrants are being offered in a
private placement, pursuant to an exemption to the registration requirements of
the Securities Act of 1933, as amended. The purchasers of the Units will have
certain registration rights with respect to the shares of Common Stock issuable
upon the conversion or exercise of the Notes or Warrants. There is no assurance
that the private placement will be successfully completed.
8. TERMINATION OF RIGHTS UNDER CERTAIN AGREEMENTS. Under the terms of
certain of the Company's distribution agreements, the other party to the
agreement, typically the producer, has the right to unilaterally terminate the
agreement if certain levels of revenues are not attained over a fixed period of
time through the Company's licensing and distribution of the Property to which
the agreement relates. If these termination rights are exercised, such exercise
could have a material adverse effect on the operations of one or
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more of the Company's divisions.
9. DEPENDENCE UPON KEY PERSONNEL. The Company is highly dependent on the
services of its Chairman of the Board, Herbert M. Pearlman, its President, David
M. Fox, its Managing Director of International Sales and Marketing, Scott
Hanock, its Executive Vice President (and President of A Pix), Robert Baruc, and
its Treasurer and Chairman of the Executive Committee, David S. Lawi. The loss
of the services of one or more of Messrs. Pearlman, Fox, Hanock, Baruc, or Lawi
would have a material adverse effect upon the Company's business. Presently,
the Company has key man life insurance only on the lives of Messrs. Fox and
Baruc in the amounts of $1,000,000 and $750,000, respectively.
10. CONTROL BY CURRENT STOCKHOLDERS, OFFICERS AND DIRECTORS. The
executive officers and directors of the Company beneficially own an aggregate of
approximately 42% of the Company's voting capital stock. Such a concentration
of voting power could serve to perpetuate current management.
11. POTENTIAL ANTI-TAKEOVER EFFECT OF PROVISIONS OF CERTIFICATE OF
INCORPORATION AND DELAWARE LAW. The Company's Board of Directors is divided
into three classes, each of which generally serves for a term of three years,
with only one class of directors being elected in each year. The directors may
only be removed, prior to the expiration of their respective terms, for cause
and by a vote of the stockholders. The Company's Certificate of Incorporation
requires the affirmative vote of at least 80% of the outstanding shares of
Common Stock to alter, amend or adopt any provision relating to the election,
number or terms of directors comprising the Board of Directors. This classified
board, the limited rights to remove directors and the super-majority voting
required to change this structure could discourage, prevent or delay a change in
control of the Company, which could have the effect of discouraging bids for the
Company and thereby prevent stockholders from receiving the maximum value for
their shares.
The Company's Certificate of Incorporation also authorizes the issuance of
"blank check" preferred stock with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the relative voting power or other rights of the
holders of the Company's Common Stock. In the event of issuance, the preferred
stock could be used, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although the Company
has no present intention to issue any additional shares of its preferred stock,
there can be no assurance that the Company will not do so in the future.
Section 203 of the Delaware General Corporation Law prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless (1)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (2) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (3) on or after such date the business combination is approved
by the board of directors and by the affirmative vote of at least 66-2/3% of the
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own), 15% or more of the corporation's voting stock.
This provision of law could similarly discourage, prevent or delay a change in
control of the Company, which could have the effect of discouraging bids for the
Company and thereby prevent stockholders from receiving the maximum value for
their shares.
12. NO DIVIDENDS. The Company has not paid any cash dividends on its
Common Stock to date and does not anticipate declaring or paying any cash
dividends on Common Stock in the foreseeable future. The Company's credit
facility prohibits the payment of cash dividends.
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13. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF CLASS B WARRANTS. The
Class B Warrants offered hereby are redeemable at a price of $.10 per Warrant,
provided that: (i) prior notice of not less than 30 days is given to the
Warrantholders; and (ii) the closing high bid price of the Common Stock on each
of the 20 consecutive trading days (or lesser number of days with the consent of
the Underwriter of the Company's initial public offering, but not less than 10
consecutive trading days) ending on the third day prior to the date on which the
Company gives notice has been at least $5.70. Warrantholders have exercise
rights until the time and date set for redemption. Notice of redemption of the
Class B Warrants could force the holders to exercise their Class B Warrants and
pay the exercise price at a time when it may be disadvantageous for them to do
so, to sell their Class B Warrants at the current market price when they might
otherwise wish to hold the warrants, or to accept the redemption price which is
likely to be substantially less than the market value of the Class B Warrants at
the time of redemption.
14. CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION OR EXEMPTION
REQUIRED FOR EXERCISE OF CLASS B WARRANTS. Holders of the Class B Warrants
will have the right to exercise their warrants for the purchase of shares of
Common Stock only if (i) a current prospectus relating to such shares is then in
effect and only if the shares are qualified for sale under the securities laws
of the applicable state or states, or (ii) an applicable exemption from such
registration and qualification requirements exist. The Company intends to keep
effective under the Securities Act of 1933, as amended (the "Act"), a current
prospectus which will permit the purchase and sale of the Common Stock
underlying the Class B Warrants offered hereby, but there can be no assurance
that the Company will be able to do so. Although the Company intends to seek to
qualify for sale the shares of Common Stock underlying such warrants in those
states in which such securities are to be offered, where no exemption otherwise
exists, no assurance can be given that such qualification will occur. The Class
B Warrants offered hereby may be deprived of any value if a prospectus covering
the shares issuable upon the exercise thereof is not kept effective under the
Act and current or if such underlying shares are not, or cannot be, registered
in the applicable states and no exemption from such qualification or
registration otherwise exists.
USE OF PROCEEDS
The Company will receive proceeds from the sale of those shares which are
issuable upon exercise of the common stock purchase warrants and options
included within the Derivative Securities. If all such Derivative Securities
are exercised, the Company will receive aggregate gross proceeds of
approximately $9,949,470. No assurance can be given, however, that all or any
portion of such Derivative Securities will be exercised. If any such Derivative
Securities are exercised, the Company intends to use the proceeds for general
corporate purposes, which may include, but are not limited to, acquisitions of
Properties, refinancing of indebtedness, working capital or other capital
expenditures and acquisitions.
SELLING SECURITY HOLDERS
The following table provides certain information with respect to the
securities offered hereby by the Selling Security Holders (the "Selling Security
Holders") (which information has been furnished to the Company by the Selling
Security Holders and other sources which the Company has not verified). Because
the Selling Security Holders may sell all or a portion of their securities
pursuant to this Prospectus and the fact that this offering is not being
underwritten on a firm commitment basis, the amount of securities that may be
owned after the offering assumes that the Selling Security Holders will offer
and sell all of the securities and not acquire any other securities issued by
the Company. The securities offered by this Prospectus may be offered from time
to time, in whole or in part, by the Selling Security Holders or by their
transferees, as to whom applicable information will, to the extent required, be
set forth in a Prospectus Supplement. See "Plan of Distribution."
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<TABLE>
<CAPTION>
CLASS B WARRANTS
Number of Percent of
Class B Class B Class B Position, office or
Warrants Warrants Warrants relationship with the
Beneficially Class B Beneficially Beneficially Company and
Owned Prior Warrants Owned After Owned After affiliates during the
To the that may the the past
OFFERING(1) BE OFFERED OFFERING(1) OFFERING(1) THREE YEARS
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
David M. Fox 25,000 25,000 ---- ---- President, Chief Executive
Officer and a Director of
the Company.
The Mezzanine
Financial Fund, See Footnote (2)
L.P. 34,468 34,468 ---- ----
Bishop & Co. 10,000 10,000 ---- ---- Larry Bishop, a Director of
the Company is a general
partner, of Bishop & Co.
Gray, Seifert & 10,000 10,000 ---- ---- Larry Bishop, a Director of
Co., Inc.Agent for the Company, is an executive
Betty B. Iselin officer of Gray, Seifert &
Co., Inc.
Herbert M.
Pearlman 93,333 45,000 48,333 3.7% Chairman of the Board of the
Company
</TABLE>
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<TABLE>
<CAPTION>
Number of Percent of
Class B Class B Class B Position, office or
Warrants Warrants Warrants relationship with the
Beneficially Class B Beneficially Beneficially Company and
Owned Prior Warrants Owned After Owned After affiliates during the
To the that may the the past
OFFERING(1) BE OFFERED OFFERING(1) OFFERING(1) THREE YEARS
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
David S. Lawi 39,167 22,750 16,417 1.3% Chairman of the Executive
Committee, Treasurer,
Secretary and Director of
the Company
</TABLE>
______________________________________
(1) The amount and percentage of Class B Warrants beneficially owned are
reported on the basis of regulations of the Commission governing the
determination of beneficial ownership of securities. Under the rules of
the Securities and Exchange Commission, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose of
or to direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days.
(2) The Mezzanine Financial Fund, L.P. ("Mezzanine") has provided loans and
other financial accommodations to the Company, from time to time, during
the past three years. Messrs. Pearlman and Lawi, executive officers and
directors of the Company, and Mr. Murphy, the Company's Chief Financial
Officer, are officers, directors and principal stockholders of the
general partner of Mezzanine. Walter M. Craig, Jr., a director of the
Company, is also an officer and director of the general partner of
Mezzanine. In addition, Messrs. Pearlman and Lawi are executive
officers, directors and principal stockholders of Helm Resources, Inc.
("Helm"), which presently owns approximately 9% of the limited
partnership interests of Mezzanine. Mr. Craig is an officer and
director of Helm and Mr. Murphy is an officer of Helm.
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<TABLE>
<CAPTION>
COMMON STOCK
Number of Percent of
Common Stock Shares Shares
Beneficially Beneficially Beneficially Position, office or
Owned Prior To Shares Owned After Owned After Relationship to the
the that may the the Company during the
OFFERING (1) BE OFFERED OFFERING(1) OFFERING(1) PAST THREE YEARS
------------ ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Critical Mass, L.L.C. 205,402 205,402 ----- ----- See Footnote (2)
Steven Churchill 47,933 47,933 ----- ----- See Footnote (3)
Charles E. Walsh 15,790 15,790 ----- ----- See Footnote (4)
G. Paul Sullivan 13,074 13,074 ----- ----- See Footnote (5)
Garrison & Kelley, CPA's PLLC 5,640 5,640 ----- ----- See Footnote (6)
TRP General Partnership 5,629 5,629 ----- ----- See Footnote (7)
Eugene Krueger 4,737 4,737 ----- ----- See Footnote (8)
Paul Speer 4,066 4,066 ----- ----- See Footnote (9)
David Lanz 3,219 3,219 ----- ----- See Footnote(10)
Baldwin & Associates, Inc. 3,158 3,158 ----- ----- See Footnote(11)
Jim McKeon 1,500 1,500 ----- ----- See Footnote(12)
Jan C. Nickman 1,320 1,320 ----- ----- See Footnote(13)
Kevin J. Garrison 1,285 1,285 ----- ----- See Footnote(14)
Kipp Kilpatrick 913 913 ----- ----- See Footnote(15)
Robert Baruc 339,999 200,000 139,999 2.4% See Footnote(16)
</TABLE>
- ------------------------------------
(1) The amount and percentage of shares of Common Stock beneficially owned
are reported on the basis of regulations of the Commission governing
the determination of beneficial ownership of securities. Under the
rules of the Securities and Exchange Commission, a person is deemed to
be a "beneficial owner" of a security if that person has or shares
"voting power", which includes the power to vote or to direct the
voting of such security, or "investment power", which includes the
power to dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities of
which
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<PAGE>
that person has the right to acquire beneficial ownership within 60
days.
(2) The members of Critical Mass, LLC ("Critical Mass") consist of G. Paul
Sullivan, Paul Speer, David Lanz, Kevin Garrison, Kipp Kilpatrick and
Charles E. Walsh. G. Paul Sullivan is the President and a director of
Miramar Images, Inc. ("Miramar"), a wholly-owned subsidiary of the
Company, and was formally a shareholder of Miramar until the Company's
acquisition of such corporation (the "Miramar Acquisition"). Kipp
Kilpatrick is an executive officer of Miramar and was also formally a
shareholder of Miramar. David Lanz, Kevin Garrison and Paul Speer
were shareholders, officers and directors of Miramar until the Miramar
Acquisition. David Lanz and Paul Speer have licensed various
entertainment properties to the Company in the past and may do so in
the future. In addition, Mr. Garrison's accounting firm, Garrison &
Kelley, CPA's PLLC performs accounting services for Miramar. Each of
the members of Critical Mass had been creditors of Miramar as a result
of loans they had extended to it. The Company purchased Miramar's
indebtedness to them at the same time it purchased all of Miramar's
outstanding shares of capital stock. Pursuant to a contractual
obligation if the proceeds of the sale of Critical Mass's shares do
not at least equal approximately $900,000 by March 17, 1998 (one year
from the Company's acquisition of Miramar's capital stock) the Company
must pay the amount of the shortfall to Critical Mass. It is expected
that the shares will be sold on or before March 17, 1998 to satisfy
debt owed by Critical Mass' members to institutional lenders as well
as to determine the amount, if any, of the shortfall.
(3) Steven Churchill is a licensor of certain entertainment properties to
Miramar. His shares, which are contained herein, were issued as part
of a settlement for unpaid royalties. Pursuant to a contractual
obligation if the proceeds of the sale of Mr. Churchill's shares do
not at least equal approximately $200,000 by March 17, 1998 (one year
from the Company's acquisition of Miramar's capital stock), the
Company will be required to pay the amount of the shortfall to Mr.
Churchill. It is expected that his shares will be sold on or before
such date.
(4) Charles E. Walsh extended a series of loans to Miramar during 1996.
The shares set forth were issued to Mr. Walsh as partial settlement of
Miramar's indebtedness with respect to such loans. See Footnote (2).
(5) G. Paul Sullivan is the president and a director of Miramar. The
shares set forth were issued by the Company in connection with its
acquisition of Mr. Sullivan's shares of Miramar capital stock. See
Footnote (2).
(6) Garrison & Kelley, CPA's PLLC performs accounting services from time
to time for Miramar. The shares set forth were issued to the firm as
part of a settlement for amounts owed by Miramar for services
rendered. See Footnote (2) and (4).
(7) TRP General Partnership leases office space to Miramar. The shares
set forth were issued as part of a settlement for amounts owed by
Miramar for past rent.
(8) Eugene Krueger is an executive officer of Baldwin & Associates, Inc.
See Footnote (11).
(9) Until the Miramar Acquisition, Paul Speer was an officer, director
and shareholder of Miramar. Mr. Speer has licensed various
entertainment properties to the Company in the past and it is expected
that he will produce and license entertainment properties to the
Company in the future. The shares set forth were issued by the
Company in connection with its acquisition of Mr. Speer's shares of
Miramar capital stock. See Footnote (2).
(10) David Lanz was a shareholder, director and officer of Miramar. Mr.
Lanz has licensed various entertainment properties to the Company in
the past and he may do so in the future. The shares set forth were
issued by the Company in connection with its acquisition of Mr. Lanz's
shares of Miramar capital
11
<PAGE>
stock. See Footnote (2).
(11) Baldwin & Associates, Inc. acted as a broker with respect to the
Company's acquisition of Miramar. The shares set forth were
issued by the Company as partial payment of a fee in connection
with such services.
(12) James McKeon has acted as a consultant to Miramar in the past with
respect to specific distribution arrangements and entertainment
projects and could be retained by Miramar from time to time in the
future. The shares set forth were issued as part of a
settlement of amounts owed by Miramar to Mr. McKeon.
(13) Jan Nickman is a licensor of certain entertainment properties to
Miramar. The shares set forth were issued as part of a
settlement of amounts owed by Miramar to Mr. Nickman primarily
for royalties.
(14) Kevin Garrison is a member of the accounting firm Garrison &
Kelley, CPA's PLLC, which provides accounting services to
Miramar. Until the Miramar Acquisition, he also was an officer,
director and shareholder of Miramar. The shares set forth were
issued by the Company in connection with its acquisition of Mr.
Garrison's shares of Miramar capital stock. See Footnotes (2)
and (6).
(15) Kipp Kilpatrick is an executive officer of Miramar and, until the
Miramar Acquisition, was a shareholder of Miramar. The shares set
forth were issued by the Company in connection with its
acquisition of Mr. Kilpatrick's shares of Miramar capital stock.
See Footnote (2).
(16) Robert Baruc is an executive officer and a director of the
Company. The shares set forth were acquired by him upon the
merger of A Pix with and into the Company.
PLAN OF DISTRIBUTION
The Selling Security Holders Securities may be sold pursuant to this
Prospectus from time to time by the Selling Security Holders, or by pledgees,
transferees or other successors in interest, on the American Stock Exchange (or
such other exchange on which the applicable Selling Security Holders Securities
are listed at the time of sale), or in the over-the-counter market or otherwise,
at prices and on terms then prevailing or at prices related to the then current
market price, or in privately negotiated transactions. The Selling Security
Holders Securities may be sold by various methods, including, but not limited to
one or more of the following: (a) directly in a privately negotiated
transaction; (b) a block trade in which the broker or dealer so engaged will
attempt to sell the Selling Security Holders Securities as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (c) purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account pursuant to this Prospectus; (d) an
exchange transaction in accordance with the rules of such exchange; and (e)
ordinary brokers' transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Security Holders may arrange for other brokers or dealers to participate.
Alternatively, the Selling Security Holders may from time to time offer the
Selling Security Holders Securities through underwriters, dealers or agents who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Security Holders or the purchasers of Selling
Security Holders Securities for whom they may act as agents. In addition, any
of the Selling Security Holders Securities which qualify for sale pursuant to
Rule 144 under the Act, or otherwise pursuant to an applicable exemption under
such act, may be sold other than pursuant to this Prospectus. The Selling
Security Holders and any such underwriters, dealers or agents that participate
in the distribution of Selling Security Holders Securities may be deemed to be
"underwriters" within the meaning of the Act, and any profit on the sale of the
Selling Security Holders Securities by such Selling Security Holders and any
discounts, commissions or concessions received by such Selling Security Holders
may be deemed to be underwriting discounts and commissions under
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<PAGE>
the Act. The Company will not receive any of the proceeds of the offering of
the Selling Security Holders Securities hereunder for the account of the Selling
Security Holders. See "Use of Proceeds."
<TABLE>
<CAPTION>
CHART OF DERIVATIVE SHARES
DESCRIPTION OF DERIVATIVE SECURITIES Exercise or
- ------------------------------------ Conversion Price Expiration or Number of
PER SHARE MATURITY DATE DERIVATIVE SHARES
--------- ------------- -----------------
<S> <C> <C> <C>
Common Stock Purchase Options $3.875 June 30, 2001 400,000
10% Convertible Subordinated Debentures 4.50 June 30, 2003 1,605,000
due June 30, 2003
Common Stock Purchase Warrants 6.00 June 30, 2003 722,250
Common Stock Purchase Warrants 4.50 December 31, 2001 295,000
Class B redeemable common stock purchase warrants 4.28 June 22, 1998 164,555
Common Stock Purchase Option 3.09 Six months after the 10,500
effective date of this
registration statement
Common Stock Purchase Warrants 4.28 December 31, 2000 10,500
Common Stock Purchase Warrants 3.70 December 31, 2001 425,805
Common Stock Purchase Warrants 3.325 September 30, 1998 39,375
Common Stock Purchase Warrants 4.04 June 30, 2000 15,750
Common Stock Purchase Warrants 4.92 June 20,2000 21,000
Common Stock Purchase Warrants 3.80 Three years after issuance 2,625
Unit Purchase Option 4.225 June 23, 1998 9,975
Class A common stock purchase warrants 3.14 June 22, 1998 9,975
</TABLE>
The Derivative Shares are issuable upon exercise or conversion of the various
applicable Derivative Securities described above. In addition, this Prospectus
includes the issuance of 9,500 Class B Warrants that are issuable upon exercise
of a Unit Purchase Option, having a price of $4.225 per Unit. Each such unit
consists of one share of Common Stock; one Class A common stock purchase
warrant, each entitling the holder to purchase 1.05 shares of Common Stock at a
price of $3.30 (i.e. $3.14 per share) and expiring June 22, 1998; and one Class
B Warrant,
13
<PAGE>
each entitling the holder to purchase 1.05 shares of Common Stock at a price of
$4.50 (i.e. $4.28 per share) and expiring June 22, 1998. The Derivative Shares
and Derivative Class B Warrants are being registered pursuant to the Act and
offered hereby to permit the issuance by the Company of registered securities
upon the exercise or conversion of options, warrants or notes in accordance with
their terms. Additional shares of Common Stock may be issuable pursuant to the
antidilution provisions of certain of the Derivative Securities, which shares
are also being registered hereby pursuant to Rule 416 promulgated under the Act.
If all of the warrants and options to purchase the Derivative Shares are
exercised, which would include the exercise of the Derivative Class B Warrants,
the Company will receive aggregate cash proceeds of approximately $9,949,470.
See "Use of Proceeds."
If required by applicable law, at the time a particular offer of Securities
is made, an accompanying Prospectus Supplement will be distributed which will
identify and set forth the aggregate amount of Securities being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, the purchase price paid by any underwriter for Securities purchased
from the Selling Security Holders, any discounts, commissions and other items
constituting compensation from the Selling Security Holders and/or the Company
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers, including the proposed selling price to the public. Such Prospectus
Supplement and, if necessary, post-effective amendment to the Registration
Statement of which this Prospectus is a part, will be filed with the Commission
to reflect the disclosure of additional information with respect to the
distribution of the Securities.
From time to time the Company may amend this Prospectus by Prospectus
Supplements, or post-effective amendments to the Registration Statement of which
this Prospectus is a part, to offer the Securities obtained by persons who may,
by virtue of their relationship to the Company, be deemed underwriters under the
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Securities may not simultaneously engage in
market making activities with respect to such Securities for a specified period
prior to the commencement of such distribution. In addition and without
limiting the foregoing, the Selling Security Holders and any person
participating in the distribution of the Securities will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Regulation M promulgated by the
Commission under the Exchange Act, which provisions may limit the timing of
purchases and sales of the Securities by the Selling Security Holders or any
such other person.
In order to comply with certain states' securities laws, if applicable, the
Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless the Securities have been registered or qualified for sale in such
jurisdiction, or unless an exemption from registration or qualification is
available and complied with.
The Company will bear all expenses of the registration of the Securities
under the Act and all expenses of notices and filings with respect to the
Securities under the applicable state Blue Sky laws. The Selling Security
Holders will be responsible for any and all discounts, commissions and other
compensation to underwriters or dealers in the distribution of the Selling
Security Holder Securities.
TRANSFER AGENT
The Transfer Agent for the Common Stock is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.
14
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the legality of the Securities offered
hereby have been passed upon for the Company by St. John & Wayne, Heron Tower,
70 East 55th Street, New York, New York 10022.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for the two year period then ended incorporated by reference in this
Prospectus have been audited by Richard A. Eisner & Company, LLP, an
independent auditor, as set forth in its report incorporated herein by
reference, and are incorporated herein in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Certificate of Incorporation of the Company provides that the Company
shall indemnify to the fullest extent permitted by Delaware law any person whom
it may indemnify thereunder, including directors, officers, employees and agents
of the Company. Such indemnification (other than as ordered by a court) shall
be made by the Company only upon a determination that indemnification is proper
in the circumstances because the individual met the applicable standard of
conduct. Advances for such indemnification may be made pending such
determination. In addition, the Certificate of Incorporation provides for the
elimination, to the extent permitted by Delaware law, of personal liability of
directors to the Company and its stockholders for monetary damages for breach of
fiduciary duty as directors.
The Company has entered into an agreement with each Selling Security Holder
providing for indemnification of the Company, and its officers, directors and
controlling persons, for certain liabilities under the Securities Act.
Insofar as indemnification of liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company, pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in said
Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action suit or proceeding), is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of 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 Act and will be governed by the final
adjudication of such issue.
15
