As filed with the Securities and Exchange Commission on August 28, 1996
Registration No. 33 - ___________
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
FOTOBALL USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0614889
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3738 Ruffin Road
San Diego, California 92123
(619) 467-9900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
______________
MICHAEL FAVISH
President and
Chief Executive Officer
Fotoball USA, Inc.
3738 Ruffin Road
San Diego, California 92123
(619) 467-9900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________
Copies to:
CHARLES I. WEISSMAN, ESQ.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue, 20th Floor
New York, New York 10022
(212) 758-9500
Telecopier No.: (212) 758-9526
___________
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
[___]
If any of the securities being registered on this form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [___]
If this Form is a post-effective supplement filed pursuant to Rule 462(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [___]
CALCULATION OF REGISTRATION FEE
Title of
each Proposed Proposed
class of maximum maximum
securities Amount to offering aggregate
to be to be price per offering Amount of
registered registered share(1) price registration fee
---------- ---------- -------- ----- ----------------
Common Stock,
par value
$.01 per share 144,445 shares $ 6.01 $ 868,114 $ 299.35
- ----------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended. Based on the average of the high and low sale prices of the
Common Stock as reported by the Nasdaq SmallCap Market on August 22, 1996.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall become effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
No dealer, sales representative or
other person has been authorized to
give any information or to make any
representations in connection with
this Offering other than those 144,445 Shares of
contained in this Prospectus and, if Common Stock
given or made, such information or
representations must not be relied
upon as having been authorized by
the Company. This Prospectus does
not constitute an offer to sell, or
a solicitation of an offer to buy,
any securities other than the
registered securities to which it FOTOBALL USA, INC.
relates or an offer to, or a
solicitation of, any person in any
jurisdiction in which such offer or
solicitation is not authorized or
would be unlawful. The delivery of
this Prospectus and/or any sale made
hereunder shall not, under any
circumstances, create any
implication that the information
contained herein is correct as of
any time subsequent to the date of
this Prospectus.
---------------
TABLE OF CONTENTS
Page
Additional Information 2
Incorporation of Certain
Documents by Reference 2 -------------------
The Company 3
The Offering 5 PROSPECTUS
Risk Factors 5
Use of Proceeds 9 -------------------
Dividend Policy 9
Selling Stockholders 10
Plan of Distribution 10 August __, 1996
Legal Matters 10
Experts 11
<PAGE>
PROSPECTUS Subject to completion, dated August 28, 1996
144,445 Shares of Common Stock
FOTOBALL USA, INC.
The securities offered hereby (the "Offering") are being sold for the
respective accounts of the Selling Stockholders named herein and consist of
144,445 shares of common stock, par value $.01 per share ("Common Stock"), of
Fotoball USA, Inc., a Delaware corporation (the "Company"). The Company will not
receive any proceeds from the sale of these securities. See "Selling
Stockholders" and "Plan of Distribution."
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"FUSA". On August 22, 1996, the closing bid price was $5.88 per share of Common
Stock.
All costs, expenses and fees in connection with the registration of the
Common Stock will be borne by the Company, except that the Selling Stockholders
will pay any commissions and fees applicable to shares sold by a Selling
Stockholder and fees of others employed by a Selling Stockholder, including
attorneys' fees. See "Plan of Distribution."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" LOCATED ON PAGES 6-9 OF THIS PROSPECTUS.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 August __, 1996
This Prospectus is subject to completion or amendment. A registration
statement relating to these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
Prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in which
such offer, solicitations or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be inspected without
charge at the Public Reference Room maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. In addition, upon request such
reports, proxy statements and other information will be made available for
inspection and copying at the Commission's public reference facilities at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained at prescribed rates upon request from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding issuers who
file electronically with the Commission. This Registration Statement has been
filed electronically through the Commission's Electronic Data Gathering,
Analysis and Retrieval (EDGAR) system and may be accessed through the
Commission's Web site.
The Company's Common Stock is listed on the Nasdaq SmallCap Market and the
Boston Stock Exchange. Reports, proxy statements and other information can be
inspected at the offices of the Nasdaq Stock Market at 1735 "K" Street, N.W.,
Washington, D.C. 20006 and at the offices of the Boston Stock Exchange at One
Boston Place, Boston, Massachusetts 02108.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement and in the exhibits thereto, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, reference is made to the
Registration Statement, including the exhibits filed therewith, copies of which
may be obtained at prescribed rates from the Commission at the public reference
facilities maintained by the Commission. Descriptions contained in this
Prospectus as to the contents of any contract or other documents filed as an
exhibit to the Registration Statement are not necessarily complete and each such
description is qualified by reference to such contract or documents.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange Act
are incorporated herein by reference:
a. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995 (the "Annual Report"), filed with the Commission on
March 30, 1996;
b. The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended March 31, 1996, filed with the commission on May 13, 1996; and
(2)<PAGE>
c. The Company's Quarterly Report on Form 10-QSB/A for the fiscal quarter
ended March 31, 1996, filed with the Commission on June 26, 1996;
d. The Company's proxy statement for its annual meeting of stockholders held
on May 2, 1996; and
e. The description of the Company's common stock, par value $.01 per share,
contained in the Company's Registration Statement on Form 8-A, filed with
the Commission on August 1, 1994.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) 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 modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or verbal request of any such
person, a copy of any or all of the documents which have been incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference to such documents). Requests for such
documents should be directed to Fotoball USA, Inc., 3738 Ruffin Road, San Diego,
California, Attention: Secretary, Telephone: (619) 467-9900.
(3)<PAGE>
THE COMPANY
Fotoball USA, Inc., a Delaware corporation (the "Company"), designs,
develops, manufactures and markets custom sports and non-sports related products
for promotional programs. Additionally, the Company designs and manufactures
custom sports products which are sold in the licensed product retail market
through independent manufacturers' representatives and directly to the customer.
The Company currently holds licenses with Major League Baseball, the Major
League Baseball Players Association, the National Association of Professional
Baseball Leagues, Inc. (representing professional minor league baseball;
collectively, "Professional Baseball") and over sixty (60) colleges and
universities ("Colleges"). The Company is in the process of renewing its
licenses with the National Football League Properties, Inc. ("NFL"). Pursuant to
these licenses, the Company has the right to use, for commercial purposes, the
names and logos of sports leagues, teams, colleges and universities and the
likenesses of certain sports figures.
The Company's products include: (i) baseballs: synthetic leather, official
size and weight baseballs licensed by Colleges and Professional Baseball,
featuring players' images, statistics and/or school, team and league logos; (ii)
footballs: synthetic leather, miniature footballs licensed by the NFL and
Colleges, featuring helmet logos and shields of NFL teams, NFL Quarterback Club
players' images, statistics and/or NFL team and league logos, and College logos
and/or mascots; (iii) basketballs: synthetic leather, miniature basketballs
licensed by Colleges, featuring College logos and/or mascots; and (iv) custom-
designed products including toy cars based upon characters featured in Chevron's
national advertising campaign.
The Company's business is segregated into two distinct market segments: the
promotional product business, in which the Company sells custom products
directly to customers, and the licensed product retail market, in which the
Company sells directly to mass merchants and through independent representatives
to the retail marketplace.
The Company's promotions customers, which are large corporations such as
Chevron, Shell, Coca-Cola, Burger King and McDonalds, purchase the Company's
products for use in promotional campaigns and in connection with their
sponsorship of professional sports teams. In 1995, 40% of the Company's sales
was derived from sales to promotions customers (with 26% of the Company's sales
derived from contracts for the sale of promotional products to Burger King
Corporation) as compared to 74% in 1994 (with 34% of the Company's sales derived
from contracts for the sale of promotional products to Chevron). The Company
provides its promotions customers with a wide range of design, product
development and manufacturing services. These services include assisting
customers in the negotiation of corporate sponsorships with professional sports
teams and their associations, in designing and developing promotions and in
procuring product licenses and authorizations. The Company is responsible for
all phases of production, including creative design, manufacturing, quality
control, packaging and shipping.
(4)<PAGE>
At the retail level, the Company's account base has increased to over 1,100
retailers, including selected department stores and mass merchants (such as
Kmart, Wal-Mart, J.C. Penney, Sears, Pro Image and Sports Authority), theme
parks (including Disney World, Disneyland, Sea World, Hershey Park and Six
Flags), airport and hotel concessionaires (including Paradise, Duty Free Shops,
Host Marriot and the Del-Star Group), various licensed sports specialty and
sporting goods chains, various consumer catalogs and Professional Baseball
stadiums (including 22 Major League Baseball stadiums and 95 professional minor
league baseball stadiums).
Fotoball USA, Inc., a California corporation and the predecessor to the
Company ("Fotoball California"), was incorporated under the laws of the State of
California on December 13, 1988. The Company was incorporated under the laws of
the State of Delaware on April 27, 1994, for the purpose of merging and
continuing the business of Fotoball California. On July 29, 1994, Fotoball
California merged with and into the Company, with the Company being the
surviving corporation. The Company's office is located at 3738 Ruffin Road, San
Diego, California 92123 and its telephone number is (619) 467-9900.
(5)<PAGE>
THE OFFERING
Securities Offered by the Company None
Securities Offered by the Selling Stockholders 144,445 shares of Common Stock
Common Stock Outstanding as of June 30, 1996 2,661,742 shares
Nasdaq Symbol for Common Stock FUSA
Boston Stock Exchange Symbol for Common Stock FBL
(1) Does not include (i) 258,000 shares of Common Stock reserved for issuance
upon exercise of outstanding stock options granted under the Company's
1994 Stock Option Plan (the "Option Plan"), (ii) 117,000 shares of Common
Stock reserved for issuance upon exercise of stock options which may be
granted under the Option Plan and (iii) 110,000 shares reserved for
issuance upon exercise of outstanding stock options granted outside of the
Option Plan, of which 75,000 shares are being offered for the account of
one of the Selling Stockholders, (iv) 1,411,673 shares of Common Stock
issuable upon exercise of outstanding Redeemable Common Stock Purchase
Warrants (the "Warrants") of the Company, and (v) 110,000 shares of Common
Stock reserved for issuance upon exercise of the Warrants included in the
purchase option (the "Purchase Option") granted to the representative of
the underwriters in the Company's initial public offering. See "Selling
Stockholders."
Use of Proceeds. The Company will not receive any proceeds from the sale of
Common Stock offered hereby. See "Use of Proceeds."
Risk Factors. The purchase of the securities offered hereby is speculative and
involves a high degree of risk. See "Risk Factors."
(6)<PAGE>
RISK FACTORS
The purchase of the shares of Common Stock offered hereby is speculative
and involves a high degree of risk, including the risk factors described below.
Each prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company before making a decision
to purchase the securities being offered hereby.
Dependence Upon Licensing Arrangements. The Company's business is based
primarily upon its use of the insignia, logos, names, colors, likenesses and
other identifying marks and images on many of its products pursuant to license
arrangements with Professional Baseball, the NFL and, to a lesser extent,
Colleges. The Company's licensing arrangements expire at various times through
February 15, 1997. The Company may acquire other licenses for new product lines;
however, there can be no assurance that the Company will be successful in
obtaining new licenses. The non-renewal or termination of one or more of the
Company's material licenses, particularly with Professional Baseball or the NFL,
could have a material adverse effect on the Company's business.
Dependence on Promotions Business. The Company's promotions business
depends primarily upon a series of one-time projects with its customers.
Although the Company has had repeat business from certain promotions customers,
there can be no assurance that the Company will be able to continue its
relationships with its promotions customers or attract new promotions customers
to generate enough revenues to operate profitably. During the year ended
December 31, 1995, 40% of the Company's sales was derived from sales of the
Company's products to 189 customers, of which Burger King accounted for
aggregate sales of $2,015,000 or 26% of sales. During the year ended December
31, 1994, 74% of the Company's sales were derived from promotions, of which
Chevron accounted for aggregate sales of $2,495,000 or 34% of total sales, and
two other customers accounted for aggregate sales of $622,000 or 8% of sales and
$639,000 or 9% of sales, respectively. Chevron and Burger King will continue to
account for a significant percentage of sales in 1996.
Dependence Upon Key Personnel. The success of the Company is largely
dependent on the personal efforts of Michael Favish, its President and Chief
Executive Officer, and Fred Ostern, its Vice President of Marketing. Mr. Favish
has entered into a five-year employment agreement with the Company, commencing
on August 11, 1994, which, among other things, precludes Mr. Favish from
competing with the Company for a period of two years following termination of
his employment with the Company. The loss of the services of Mr. Favish would
have a material adverse effect on the Company's business and prospects. The
Company maintains "key man" life insurance on the life of Michael Favish in the
amount of $1,000,000. Mr. Ostern has entered into a three-year employment
agreement with the Company, commencing on January 1, 1996, which, among other
things, precludes Mr. Ostern from competing with the Company for a period of one
year following termination of his employment with the Company. The loss of the
services of Mr. Ostern would have a material adverse effect on the Company's
business and prospects.
Seasonality; Concentration of Business; Major League Baseball Strike.
During the year ended December 31, 1995, 75% of the Company's sales was derived
(7)<PAGE>
from baseball-related products and 72% of the Company's sales was recorded
during the third (46%) and fourth (26%) quarters. During the year ended December
31, 1994, 85% of the Company's sales was derived from baseball-related products
and 86% of the Company's sales was recorded during the first (19%) and second
(67%) quarters. Sales during the third and fourth quarters of 1994 were
adversely impacted due to the Major League Baseball ("MLB") strike, as discussed
below.
The Company is susceptible to circumstances affecting professional sports
leagues or teams, such as player strikes and owner lockouts. On August 12, 1994,
the Major League Baseball Players Association (the "MLBPA") went on strike
citing differences with team owners regarding compensation. On April 2, 1995,
the MLBPA ended their strike and agreed to return to MLB teams without having
signed a collective bargaining agreement ("CBA") with team owners. The beginning
of the 1995 MLB season was delayed from April 2, 1995 until April 25, 1995. As a
result of the strike and the uncertainty as to the continuation in full of the
1995 MLB season, the Company's baseball-related business was materially
adversely impacted during the last half of 1994 and the first half of 1995.
However, the Company experienced an upsurge in its baseball and football-related
business during the last half of 1995. The current lack of a CBA has not had an
adverse impact upon the Company's baseball business, with baseball-related sales
increasing 382%, to $5,188,000 for the three months ended June 30, 1996 as
compared to $1,076,000 for the corresponding prior year ended. However, if a CBA
remains unresolved into 1997, it could adversely affect the Company's baseball
business in future periods. The Company believes that the continuing decrease in
the dependence upon baseball-related sales during the past several years will
continue in the future, with the introduction of new product lines and non-
baseball-related promotions.
Consumer Trends. The Company's business is vulnerable to a number of
factors beyond its control, including changes in consumer tastes and enthusiasm
for spectator sports. Although the Company has benefited from the interest of
consumers in collecting souvenirs, especially souvenirs relating to professional
sports, there can be no assurance that such interest will continue, especially
given the occurrence of player strikes and owner lockouts in MLB and the
National Hockey League in recent years. Although the Company continuously
evaluates its product lines to tailor them to consumer trends, there can be no
assurance that it will be successful in doing so.
Competition and Technological Change. The promotions and sports-related
business is highly competitive, diverse and constantly changing. The Company
experiences substantial competition in most of its product categories from a
number of companies, some of which have greater financial resources and
marketing and manufacturing capabilities than the Company. Many of the Company's
products are sold under non-exclusive license agreements, and licensors may
license more than one vendor in a particular product line. Although the Company
(8)<PAGE>
has been successful in obtaining and renewing such licenses, and in being the
sole vendor of certain licensed product lines, there can be no assurance that
other competitors will not obtain competing licenses to sell the same or similar
products in the future. The technology currently being used by the Company has
also contributed to restricting direct competition of its product lines. The
future success of the Company will be dependent, in large part, upon its
proprietary printing process and ability to keep pace with advancing printing
and photographic technology. There can be no assurance that new printing or
photographic technology will not be developed that renders the Company's current
printing process and products obsolete or inferior or that other competitors
will not develop the technology currently used by the Company.
Foreign Manufacturing and Suppliers. A significant portion of the raw
materials used in the production of the Company's products are the blank
baseballs, footballs and basketballs. In 1995, the Company purchased
approximately 74% of its raw materials from four companies located in China,
with one manufacturer accounting for 61% of total raw materials purchased. The
Company is increasingly shifting the imprinting of its products, including
certain four-color retail product, to companies located in China to capitalize
on significantly lower manufacturing costs. Foreign manufacturing is subject to
a number of risks, including transportation delays and interruptions, political
and economic disruptions, the imposition of tariffs, quotas and other import or
export controls, and changes in government policies. China currently enjoys most
favored nation ("MFN") trading status with the United States, although there can
be no assurance that China will continue to enjoy MFN trading status in the
future or that conditions on China's MFN status will not be imposed. Any
conditions imposed by the President of the United States and any legislation in
the United States revoking or placing further conditions on China's MFN trading
status could have a material adverse effect on the cost of the Company's
baseballs, footballs and basketballs because products originating from China
could be subjected to substantially higher rates of duty. Although alternative
suppliers may be available in other countries at competitive prices, and the
Company continues to evaluate their ability to compete in terms of cost,
quality, production capacity and other considerations, there can be no assurance
that the Company would be able to find alternative suppliers in a timely manner
or that such suppliers would meet the Company's cost, quality or production
capability standards. The inability of a supplier to ship orders of the
Company's products in a timely manner could adversely affect the Company's
ability to deliver products to its customers on schedule or could otherwise
adversely affect the Company.
Lack of Patent Protection. The Company is able to successfully reproduce an
image, with all its half tones, on its products with detail and accuracy, using
the Company's proprietary printing process. This process was developed by the
Company by combining several pre-existing techniques that are used in other
similar industries. To the Company's knowledge, no other company currently has
the ability to perform the complete process. The Company does not rely upon any
material patents or licensed technology in the operation of its business. The
Company does not believe that it is possible to be issued a patent on its
proprietary process and, accordingly, there can be no assurance that the
Company's techniques, processes and formulations will not otherwise become known
to, or independently developed by, competitors of the Company.
(9)<PAGE>
Future Capital Requirements. The Company's future capital requirements will
depend on many factors, including cash flow from operations, continued progress
in the development of its products, the successful implementation of new product
lines, the successful expansion of the Company's current product lines,
competing technological and market developments, and the Company's ability to
market its products successfully. To the extent that the funds generated by the
Company's initial public offering, together with cash flow from operations, are
insufficient to fund the Company's activities, it will be necessary to raise
additional funds, through equity or debt financings. Any equity financings could
result in dilution to the Company's then existing stockholders, and any
financing, if available at all, may be on terms unfavorable to the Company. If
adequate funds are not available, the Company may be required to curtail its
activities significantly and its business would be adversely affected.
Dividends. The Company has not paid any dividends on its Common Stock to
date and does not intend to pay dividends in the foreseeable future. It is the
present intention of the Board of Directors to retain all earnings, if any, for
use in the Company's business operations and, accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future. See "Dividend
Policy."
Limitation on Net Operating Loss Carryforwards. As of December 31, 1995,
the Company had net operating loss carryforwards for income tax purposes of
$2,757,515. These carryforwards are subject to limitations on the amount that
can be utilized by the Company in a fiscal year due to change of ownership rules
as defined by applicable tax statutes. An ownership change occurred upon
completion of the Company's initial public offering which resulted in the
limitation on the use of carryforward losses incurred prior to the ownership
change. Consequently, the Company will not have a portion of its net operating
loss carryforwards available in the current period to offset taxable income, if
any, thereby reducing the Company's net income.
No Assurance of Public Market. Although the Common Stock is listed on the
Nasdaq SmallCap Market, there can be no assurance that the Company will, in the
future, be able to meet all requirements for continued listing thereon. In the
absence of an active trading market or if such securities cannot be traded on
the Nasdaq SmallCap Market, the securities could instead be traded on the
Electronic Bulletin Board or in the "Pink Sheets." In such event, the liquidity
and stock price of such securities in the secondary market may be adversely
affected. In addition, in the event such securities are delisted, broker-dealers
have certain regulatory burdens imposed upon them which may discourage broker-
dealers from effecting transactions in such securities, further limiting the
liquidity of such securities.
Shares Eligible for Future Sale. As of June 30, 1996, the Company has
2,661,742 shares of Common Stock outstanding. Of such shares, at least 1,442,923
are freely tradeable under the Securities Act of 1933, as amended (the
"Securities Act"). The up to 1,218,819 remaining shares are "Restricted
Securities," as that term is defined under Rule 144 promulgated under the
Securities Act.
(10)<PAGE>
Effect of Outstanding Options. As of June 30, 1996, there were outstanding
stock options under the Option Plan to purchase an aggregate of 258,000 shares
of Common Stock at per share exercise prices ranging from $5.25 to $8.00 and
outstanding stock options outside of the Option Plan to purchase an aggregate of
110,000 shares at per share exercise prices ranging from $.01 to $5.25, of which
75,000 shares are being offered for the account of one of the Selling
Stockholders. In addition, all of the Warrants and the Purchase Option are
exercisable. The exercise of such outstanding stock options, the Warrants and
the Purchase Option (and the Warrants included therein) will dilute the
percentage ownership of the Company's stockholders, and any sales in the public
market of Common Stock underlying such stock options, Warrants and the Purchase
Option (and the Warrants included therein) may adversely affect prevailing
market prices for the Common Stock. Moreover, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of such outstanding securities can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than those provided in such stock
options, Warrants and the Purchase Option. In addition, the Company has granted
certain demand and piggy-back registration rights with respect to the securities
issuable upon exercise of the Purchase Option.
Certain Anti-takeover Provisions; Authorization of Preferred Stock:
Indemnification. Certain provisions of the Company's Amended and Restated
Certificate of Incorporation (the "Certificate") and Amended and Restated By-
Laws may be deemed to have the effect of discouraging a third party from
pursuing a non-negotiated takeover of the Company and preventing certain changes
in control. In particular, the Certificate authorizes the issuance of 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
voting power or other rights of the holders of the Common Stock. In the event of
issuance, the preferred stock could be utilized, 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 shares of
its preferred stock, there can be no assurance that the Company will not do so
in the future.
The Certificate contains provisions to limit the personal liability of its
directors for monetary damages for breach of their fiduciary duties, except for
liability that cannot be eliminated under the Delaware General Corporation Law
("DGCL"), including (i) for any breach of the duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for any unlawful
payment of a dividend or unlawful stock purchase or redemption, as provided in
Section 174 of the DGCL, or (iv) for any transaction from which a director
(11)<PAGE>
derived an improper personal benefit. The Certificate also provides that the
Company shall indemnify its directors and officers to the fullest extent
permitted by Section 145 of the DGCL, including circumstances in which
indemnification is otherwise discretionary. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the Company, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
offered hereby. All of the proceeds from the sale of the Common Stock offered
hereby will be received by the Selling Stockholders.
DIVIDEND POLICY
To date, the Company has not paid any dividends on its Common Stock. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Company
does not expect to declare or pay any dividends in the foreseeable future.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the Selling
Stockholders as of June 30, 1996. The Company will not receive any proceeds from
the sale of any securities by the Selling Stockholders.
Beneficial
Ownership of
Shares of
Beneficial Common Stock
Ownership of Shares of After Giving
Name of Shares Common Stock Effect to
Selling Stockholder of Common Stock Offered for Sale Proposed Sale
- ------------------- --------------- ---------------- -------------
ADR Management
Group, Ltd.(1) 75,000 75,000 0
Resource One
Group, Inc.(2) 71,945 69,445 2,500
- ------------------- --------------- ---------------- -------------
Total 146,945 144,445 2,500
=================== =============== ================ =============
(12)<PAGE>
(1) ADR Management Group Ltd. ("ADR") is currently retained as a consultant to
the Company, and, in connection with the retention of ADR as a consultant
to the Company, the Company issued to ADR an option to purchase 75,000
shares of Common Stock at a per share exercise price of $5.25.
(2) Resource One Group, Inc., a financial consulting and advisory company
("Resource One"), is a corporation wholly owned by Robert N. Weingarten, a
director of the Company. Mr. Weingarten, through Resource One, is
currently retained as a consultant to the Company. Pursuant to a prior
consulting agreement with the Company, the Company issued to Mr.
Weingarten an option to purchase 69,445 shares of Common Stock for an
aggregate purchase price of $1,000, which option was assigned to and
exercised by Resource One.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell their shares of Common Stock from time to
time.
The 144,445 shares of Common Stock being sold hereby may be offered to
purchasers directly by any of the Selling Stockholders or through underwriters,
brokers, dealers or agents from time to time in one or more transactions (i) in
the over-the-counter market, (ii) in transactions other than in the over-the-
counter market or (iii) through the writing of options (whether such options are
listed on an options exchange or otherwise) on, or in settlement of, short sales
of shares. Any such transactions may be at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, at varying prices
determined at the time of sale or at negotiated or fixed prices, in each case as
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and such underwriters, brokers, dealers or agents or purchasers if
the Selling Stockholders effect such transactions by selling shares to or
through underwriters, brokers, dealers or agents, such underwriters, brokers,
dealers, or agents receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of securities
for whom they may act as agent (which discounts, concessions or commission as to
particular underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved). The Selling Stockholders and
any dealers or agents that participate in the distribution of securities offered
hereby may be deemed to be underwriters, and any profit on the sale of such
securities by them and any discounts, commissions, or concessions received by
any such dealers or agents might be deemed to underwriting discounts and
commissions under the Securities Act.
The securities offered hereby may be sold pursuant to this Prospectus or
pursuant to an available exemption from the registration requirements of the
Securities Act, such as the provisions of Rule 144 promulgated under the
Securities Act, to the extent applicable. Under the securities laws of certain
(13)<PAGE>
states, the securities offered hereby may be sold in such states only through
registered or licensed brokers or dealers. In addition, in certain states the
securities may not be sold unless the securities have been registered or
qualified for sale in such state or an exemption from registration of
qualification is available and is complied with.
The Company will pay substantially all of the expenses incident to this
offering, other than commissions and fees and fees of others employed by a
Selling Stockholder, including attorney's fees. The Company will not receive any
of the proceeds from the sale of any of the shares by the Selling Stockholders.
Each Selling Stockholder will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, including, without
limitation, Rules 10b-2, 10b-6 and 10b-7 which provisions may limit the timing
of purchases and sales of any of the securities by the Selling Stockholders. All
of the foregoing may affect the marketability of the securities.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York.
EXPERTS
The financial statements of the Company at December 31, 1994 and 1995 appearing
in the Company's Annual Report on Form 10-KSB for the year ended December
31,1995 have been audited by Hollander, Gilbert & Co., independent auditors, as
set forth in their reports thereon appearing therein, and are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
(14)<PAGE>
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the Offering are:
Accounting fees and expenses* $ 2,000.00
Legal fees and expenses* 5,000.00
Miscellaneous* 3,000.00
-------------
Total $ 10,000.00
=============
- --------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
The indemnification of officers and directors of the Company is governed by
Section 145 of the DGCL and the Certificate and By-Laws of the Company. Among
other things, the DGCL permits indemnification of a director, officer, employee
or agent in civil, criminal, administrative or investigative actions, suits or
proceedings (other than an action by or in the right of the corporation) to
which such person is a party or is threatened to be made a party by reason of
the fact of such relationship with the corporation or the fact that such person
is or was serving in a similar capacity with another entity at the request of
the corporation against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him if such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. No indemnification may be made in any such suit to any
person adjudged to be liable to the corporation unless and only to the extent
that the Delaware Court of Chancery or the court in which the action was brought
determines that, despite the adjudication of liability, such person is under all
circumstances, fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper. Under the DGCL, to the extent that a
director, officer, employee or agent is successful, on the merits or otherwise,
in the defense of any action, suit or proceeding or any claim, issue or matter
therein (whether or not the suit is brought by or in the right of the
corporation), he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him. In all cases in which
indemnification is permitted (unless ordered by a court), it may be made by the
corporation only as authorized in the specific case upon a determination that
the applicable standard of conduct has been met by the party to be indemnified.
The determination must be made by a majority vote of a quorum consisting of the
directors who were not parties to the action or, if such a quorum is not
obtainable, or even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders. The statute authorizes the corporation to pay expenses incurred by
an officer or director in advance of a final disposition of a proceeding upon
receipt of an undertaking by or on behalf of the person to whom the advance will
II-1<PAGE>
be made, to repay the advances if it shall ultimately be determined that he was
not entitled to indemnification. The DGCL provides that indemnification and
advances of expenses permitted thereunder are not to be exclusive of any rights
to which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The DGCL also authorizes the corporation to purchase
and maintain liability insurance on behalf of its directors, officers, employees
and agents regardless of whether the corporation would have the statutory power
to indemnify such persons against the liabilities insured.
The Certificate provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the DGCL or (iv) for any transaction
from which the director derived an improper personal benefit.
The By-Laws provide that directors, officers and others shall be
indemnified to the fullest extent authorized by the DGCL, as in effect (or, to
the extent indemnification is broadened, as it may be amended), against any and
all judgments, fines and amounts paid in settling or otherwise disposing of
threatened, pending or completed actions, suits or proceedings, whether civil,
criminal, administrative or investigative and expenses incurred by such person
in connection therewith. The By-Laws further provide that, to the extent
permitted by law, expenses so incurred by any such person in defending a civil
or criminal action or proceeding shall, at his request, be paid by the Company
in advance of the final disposition of such action or proceeding.
The By-Laws provide that the right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final disposition
shall not be exclusive of any other right which any person may have or acquire
under any statute, provision of the Certificate or By-Laws or otherwise.
The Company maintains directors and officers liability and company
reimbursement insurance which, among other things, (i) provides for payment on
behalf of its officers and directors against loss as defined in the policy
stemming from acts committed by directors and officers in their capacity such
and (ii) provides for payment on behalf of the Company against such loss but
only when the Company shall be required or permitted to indemnify directors or
officers for such loss pursuant to statutory or common law or pursuant to duly
effective Certificate or By-Law provisions.
II-2<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1.1 Form of Underwriting Agreement.(1)
4.1 Form of Representative's Unit Purchase Option.(2)
4.2 Form of Warrant Agreement.(2)
4.3 Specimen Warrant Certificate.(3)
4.4 Specimen Stock Certificate.(3)
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP.(4)
23.1 Consent of Hollander, Gilbert & Co.(4)
23.2 Consent of Shereff, Friedman, Hoffman & Goodman,
LLP (contained in Exhibit 5.1).(4)
24.1 Power of Attorney (included in Part II of this Registration
Statement)(4)
27.1 Financial Data Schedule(4)
- -----------------------
(1) Exhibits to the Company's Registration Statement on Form SB-2 filed with
the Commission on August 11, 1994 incorporated herein by reference.
(2) Exhibits to the Company's Registration Statement on Form SB-2 filed with
the Commission on August 1, 1994 incorporated herein by reference.
(3) Exhibits to the Company's Registration Statement on Form SB-2 filed with
the Commission on August 9, 1994 incorporated herein by reference.
(4) Filed herewith.
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
II-3<PAGE>
Item 17. Undertakings.
(a) Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the 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 small business issuer
of expenses incurred or paid by a director, officer or controlling person of
the small business issuer 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 small business issuer 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.
(b) The undersigned small business issuer hereby undertakes that it will:
(1) file, during any period in which it offers or sell securities, a post
-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set
forth in the registration statement; and
(iii) include any additional or changed material information on the plan
of distribution;
(2) for determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time to be the
initial bona fide offering.
(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) for purposes of determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it
effective; and
(5) for the purpose of determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as
a new registration statement for the securities offered in the
registration statement, and that offering of such securities at that time
as the initial bona fide offering of those securities.
II-4<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of San Diego, State of California, on August 27, 1996.
FOTOBALL USA, INC.
/s/ Michael Favish
_________________________
Michael Favish
President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signatures appears below constitutes and appoints Michael Favish and David G.
Forster, and each of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any and all capacities to execute and sign any and all amendments or post-
effective amendments to this Registration Statement, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof and the Registrant hereby confers like authority on its
behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
II-5<PAGE>
Signature Titles Date
- --------- ------ ----
/s/ Michael Favish
__________________________ President, August 27, 1996
Michael Favish Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ David G. Forster
__________________________ Vice President, Finance, August 27, 1996
David G. Forster Treasurer, and Chief
Financial Officer
(Principal Financial &
Accounting Officer)
/s/ William R. Hasvold
__________________________ Director August 27, 1996
William R. Hasvold
/s/ Joel K. Rubenstein
__________________________ Director August 27, 1996
Joel K. Rubenstein
/s/ Sabin C. Streeter
__________________________ Director August 27, 1996
Sabin C. Streeter
/s/ Robert N. Weingarten
__________________________ Director August 27, 1996
Robert N. Weingarten
II-6
<PAGE>
Exhibit Index
Exhibit No. Exhibits
- ---------- --------
5.1 Opinion of Shereff, Friedman, Hoffman and Goodman, LLP.
23.1 Consent of Hollander, Gilbert & Co.
27.1 Financial Data Schedule.
II-7<PAGE>
August 26, 1996
Fotoball USA, Inc.
3738 Ruffin Road
San Diego, California 92123
Dear Sirs:
Fotoball USA, Inc., a Delaware corporation (the "Company"), intends to
transmit for filing with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended, on Form S-3 (the
"Registration Statement") which relates to 144,445 shares of the Company's
common stock, par value $.01 per share (the "Shares"), which are being offered
for sale by the selling stockholders named in the Registration Statement (the
"Selling Stockholders"). This opinion is an exhibit to the Registration
Statement.
We have acted as counsel to the Company in connection with the
proposed offer and sale of the Shares as contemplated by the Registration
Statement. However, we are not general counsel to the Company and would not
ordinarily be familiar with or aware of matters relating to the Company unless
they are brought to our attention by representatives of the Company. We have
examined copies (in each case signed, certified or otherwise proved to our
satisfaction) of the Company's Certificate of Incorporation and By-Laws as
presently in effect, minutes and other instruments evidencing actions taken by
the Company's directors and stockholders, and such other documents and
instruments relating to the Company and the proposed offering as we have deemed
necessary under the circumstances. In our examination of all such agreements,
documents, certificates and instruments, we have assumed the genuineness of all
signatures and the authenticity of all agreements, documents, certificates and
instruments submitted to us as originals and the conformity with the originals
of all agreements, instruments, documents and certificates submitted to us as
copies. Insofar as this opinion relates to securities to be issued in the
future, we have assumed that all applicable laws, rules and regulations in
effect at the time of such issuance are the same as such laws, rules and
regulations in effect as of the date hereof.
We note that we are members of the Bar of the State of New York and do
not hold ourselves out as experts in or opine on the laws of any jurisdiction
other than the State of New York and the federal laws of the United States.
Insofar as the opinions set forth below relate to the laws of the State of
Delaware, we have relied solely upon our reading of standard compilations of the
Delaware General Corporation Law, as presently in effect.
Based on the foregoing, and subject to and in reliance on the accuracy
and completeness of the information relevant thereto provided to us, it is our
opinion that:
1. The Company has been duly incorporated under the laws of the
State of Delaware and has an authorized capital stock consisting
of 15,000,000 shares of common stock, par value $.01 per share,
and 1,000,000 shares of preferred stock, par value $.01 per
share.
2. The Shares issued or to be issued to the Selling Stockholders
have been duly authorized and (subject to the effectiveness of
the Registration Statement and compliance with applicable state
securities laws) are or, when issued and paid for in accordance
with the terms of the stock options relating thereto, will be
legally and validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to any filing made by the Company under
the securities or "Blue Sky" laws of any state.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes, except as expressly provided in the
preceding paragraph.
Very truly yours,
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated February 16, 1996,
relating to the financial statements of Fotoball USA, Inc. which are
incorporated by reference in such Prospectus. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ HOLLANDER, GILBERT & CO.
____________________________
HOLLANDER, GILBERT & CO.
Los Angeles, California
August 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMA-
TION EXTRACTED FROM THE FINANCIAL STATEMENTS
CONTAINED IN THE FOTOBALL USA, INC. FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,184,726
<SECURITIES> 0
<RECEIVABLES> 5,350,785
<ALLOWANCES> 0
<INVENTORY> 1,834,288
<CURRENT-ASSETS> 11,010,331
<PP&E> 1,460,742
<DEPRECIATION> 564,619
<TOTAL-ASSETS> 12,494,877
<CURRENT-LIABILITIES> 4,342,904
<BONDS> 0
0
0
<COMMON> 26,617
<OTHER-SE> 8,002,443
<TOTAL-LIABILITY-AND-EQUITY> 12,494,877
<SALES> 15,153,860
<TOTAL-REVENUES> 15,153,860
<CGS> 10,380,311
<TOTAL-COSTS> 2,746,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,577
<INCOME-PRETAX> 2,102,871
<INCOME-TAX> 844,100
<INCOME-CONTINUING> 1,258,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,258,771
<EPS-PRIMARY> .46
<EPS-DILUTED> .35
</TABLE>
