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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DOVE ENTERTAINMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 3652 95-4015834
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
(310) 786-1600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
RONALD LIGHTSTONE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DOVE ENTERTAINMENT, INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
(310) 786-1600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE AS
DETERMINED BY MARKET CONDITIONS.
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 to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
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.
-1-
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration 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
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT AGGREGATE AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE(1) PRICE FEE
- ---------------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per 8,308,841 shares (2) $1.34375 $11,165,005.10 $3,294
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
based on the average of the high and low prices of the Common Stock
reported on the NASDAQ on December 29, 1997, in accordance with Rule
457(c) under the Securities Act of 1933.
(2) Consists of 1,205,578 shares of Common Stock, plus 3,218,000 shares of
Common Stock issuable upon conversion of outstanding convertible
preferred stock, plus 3,285,263 shares of Common Stock issuable upon
exercise of outstanding warrants, plus 200,000 shares of Common stock
issuable upon exercise of outstanding options, plus 400,000 to be issued
in connection with an executive employment agreement, plus a presently
undeterminable number of shares of Common Stock as may be issuable
pursuant to the anti-dilution provisions thereof for which no
registration fee is paid.
(3) The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE> 3
<TABLE>
<S> <C> <C>
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Undertakings
* Not Applicable
</TABLE>
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INFORMATION CONTAINED HEREIN 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, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1997
8,308,841 SHARES
DOVE ENTERTAINMENT, INC.
COMMON STOCK
This Prospectus relates to an aggregate of 8,308,841 shares (the
"Shares") of common stock, $.01 par value per share (the "Common Stock"), of
Dove Entertainment, Inc., a California corporation (the "Company"), of which (i)
1,205,578 shares are currently issued and outstanding, (ii) 3,218,000 shares
are issuable by the Company upon conversion of certain preferred stock
previously issued by the Company (the "Preferred Stock"), (iii) 3,285,263
Shares are issuable by the Company upon the exercise of certain warrants (the
"Warrants") issued by the Company to purchase shares of Common Stock, (iv)
200,000 shares are issuable by the Company upon the exercise of certain
options previously issued by the Company (the "Options") and (v) 400,000 shares
issuable in connection with an executive employment agreement, all of which may
be offered for sale by the holders or their assigns (collectively, the "Selling
Shareholders"). See "Description of Securities".
The Company will receive proceeds from the applicable Selling
Shareholders in the event the Warrants or the Options are exercised, except in
certain cases in which such Warrants or Options are exercised pursuant to the
"net" or cashless exercise provisions thereof. There is no assurance that any of
the Preferred Stock will be converted into Common Stock or that any of the
Warrants or Options will be exercised. The Company will not receive any proceeds
from the sale of Shares offered by the Selling Shareholders.
The Common Stock is listed on the Nasdaq SmallCap Market under the
trading symbol "DOVE." On December 30, 1997, the closing bid price of the Common
Stock as reported on the Nasdaq SmallCap Market was $1.25 per share.
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING
ON PAGE 5 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
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COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Selling Shareholders, acting as principal for their own account,
directly or through agents, dealers, brokers or underwriters to be designated
from time to time, may sell the Shares from time to time on terms to be
determined at the time of sale. To the extent required, the number of Shares to
be sold, the respective purchase price and public offering price, the name of
any agent, dealer, broker or underwriter and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each Selling
Shareholder reserves the sole right to accept or reject, in whole or in part,
any proposed purchase of the Shares.
The date of this Prospectus is ____________, 1998
AVAILABLE 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 can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information filed by the Company with the Commission. The Company's Common
Stock is listed on the Nasdaq SmallCap Market. Such material can also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the Shares offered
hereby is contained in the Registration Statement on Form S-3 (of which this
Prospectus is a part) and the exhibits thereto filed with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
does not contain all the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. For further information pertaining to the Company
and the Shares offered hereby, reference is hereby made to the Registration
Statement (including documents incorporated by reference therein) and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete, and
in each instance such statements are qualified in their entirety by
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reference to the copy of such contract or other document filed as an exhibit to
the Registration Statement or incorporated by reference therein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:
1. Annual Report of the Company on Form 10-KSB for the fiscal year ended
December 31, 1996;
2. Amendment to Annual Report of the Company on Form 10-KSB/A for the
fiscal year ended December 31, 1996, filed April 30, 1997;
3. Quarterly Report of the Company on Form 10-QSB for the fiscal quarter
ended March 31, 1997;
4. Quarterly Report of the Company on Form 10-QSB for the fiscal quarter
ended June 30, 1997;
5. Quarterly Report of the Company on Form 10-QSB for the fiscal quarter
ended September 30, 1997;
6. Amendment No. 1 to Quarterly Report of the Company on Form 10-QSB/A for
the fiscal quarter ended September 30, 1997, filed November 24, 1997;
7. Current Report of the Company on Form 8-K filed June 25, 1997; and
8. The description of Common Stock contained in the Company's Registration
Statement on Form 8-A, filed on October 14, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be 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, in any accompanying Prospectus Supplement 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 or superseded,
to constitute a part of this Prospectus.
Copies of all documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference herein) will be provided without charge to each person, including any
beneficial owner, who receives a copy of this Prospectus on the request of such
person made to Dove Entertainment, Inc., 8955 Beverly Boulevard, Los Angeles,
California 90048, tel:
(310)
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786-1600, Attention: Robert Murray.
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information and financial
statements (including the notes thereto) incorporated by reference herein.
Unless the context otherwise requires, all references in this Prospectus to the
"Company" or "Dove" refer to Dove Entertainment, Inc. and its subsidiaries. This
Prospectus contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in "Risk
Factors."
THE COMPANY
Dove Entertainment, Inc. commenced business in 1985 as one of the
pioneers of the audio book industry and has become one of the leading
independent producers (i.e., unaffiliated with any single book publisher) of
audio books in the United States. Through Dove Four Point, Inc. ("Dove
Television"), a wholly owned subsidiary of the Company, the Company is engaged
in the production and development of television programming. Other activities of
the Company include a limited printed book publishing program and the
distribution of feature films and television.
Through its audio division, the Company has produced and distributed an
average of approximately 100 to 120 new audio titles annually since its
inception and has built a library of over 1,000 audio titles. The Company's
audio books generally consist of audio recordings of abridged and unabridged
works from well-known authors such as Sidney Sheldon, Amy Tan,Jack Higgins and
Dominick Dunne and read by the author or celebrity actors such as Roger Moore,
Sharon Stone and Gregory Peck. The Company's most successful audio books to date
have been "The Bridges of Madison County" read by its author Robert James Waller
and "A Brief History of Time" read by Michael Jackson. Audio titles scheduled
for release in 1998 include "American Dreams" by John Jakes and "The Predators"
by Harold Robbins. There is no assurance that the Company will publish any or
all of such audio books in development or that any of such audio books that are
developed will be successful.
At the end of 1995, the Company began a printed book publishing program
and published approximately 35 titles in 1996. In 1996, the Company embarked on
a major printed book publishing program with a scheduled 75 print titles for
1997. However, following disappointing results from the 1996 and early 1997
list, the Company has substantially curtailed the printed book program. The
Company is currently developing up to 24 books for potential publication in
1998, including "Quantum Leap Thinking" (in trade paperback) by James Mapes and
"On Communicating" and "On Selling" (in trade paperback) by Mark McCormack.
There is no assurance that the Company will publish any or all of such books in
development or that any of such books that are developed will be successful.
The Company has been an independent developer and producer of
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long-form television programming, consisting of movies-for-television for the
major domestic television networks. In April 1996, the Company significantly
expanded its presence in television programming through the acquisition of Four
Point Entertainment, Inc.(now Dove Television). Dove Television develops and
produces both episodic series and long-form television programming, including
pilots, series, telefilms, mini-series, talk shows, and game shows for the major
network, cable and syndicated markets. In addition, Dove Television owns and
operates post-production and edit facilities for its own and third-party
programming. Since its inception ten years ago, Four Point Entertainment has
produced over 26 television shows (accounting for 1,415 episodes of national
television programming), including "American Gladiators" and "Amazing America."
In April 1997, Dove Television received an order from the ABC Television Network
for a made for television movie entitled "Unwed Father" and has entered into a
distribution agreement with respect to the non US network rights with Bonneville
Worldwide Entertainment. Unwed Father aired on ABC on October 12, 1997. Dove
Television currently produces the syndicated series, "Make Me Laugh"
(distributed by Buena Vista in association with The Walt Disney Company).
During the second quarter of 1995, the Company formed a wholly-owned
subsidiary, Dove International, Inc. ("Dove International"), to engage in
domestic distribution of feature films. In July 1996, the Company embarked on a
program to acquire independent films and videos for distribution in the United
States and Canada on an all rights basis (including theatrical, home video and
all forms of television and a video output arrangement), but following review in
1997, has discontinued the theatrical production and video distribution
operations and has limited the film and television distribution operations to
the existing film and future television library, and television programs
provided by Dove Television.
The Company was incorporated in California in 1985. Its principal
executive offices are located at 8955 Beverly Boulevard, Los Angeles, California
90048. Its telephone number is (310) 786-1600.
RISK FACTORS
Prospective investors should consider carefully the following factors,
as well as all of the other information set forth in this Prospectus, in
evaluating an investment in the Shares.
NET OPERATING LOSSES; UNCERTAINTY AS TO FUTURE OPERATING RESULTS.
The Company had a net loss from operations of $6,426,000 for fiscal year
ended December 31, 1996 and $9,773,000 for the nine months ended September 30,
1997. The Company anticipates that it will incur a loss for the quarter ended
December 31, 1997. Although the Company has implemented a cost savings program
in the second quarter of 1997, the Company's expenses have increased each fiscal
year and can be expected to increase in connection with the expansion of the
Company's publishing, television and film distribution activities. Accordingly,
the Company's future
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profitability will depend upon obtaining at least corresponding increases in
revenues from operations. There is no assurance that the Company will achieve
revenue growth in the future or that the Company's future operations will be
profitable. The Company has historically experienced significant negative cash
flows from operations. If the Company is unable to realize anticipated revenues
or if the Company incurs costs inconsistent with anticipated levels, the Company
would either need to obtain additional financing (including possibly through the
sale of debt or equity securities, by obtaining additional bank financing or
through the sale of certain assets), limit its commitments to new projects or
possibly curtail its current operations. In addition, any further expansion of
the Company or acquisitions of particular properties or libraries, would require
capital resources beyond those currently available to the Company, which
acquisition of such resources would be dependent upon the ability of the Company
to obtain additional sources of working capital. There is no assurance that any
such additional sources of working capital will be available on acceptable
terms.
CERTAIN RISKS RELATING TO DOVE TELEVISION.
The Company's liquidity has also been adversely affected by the need to
fund certain operating expenses of Dove Television. There is no assurance that
any of Dove Television's programming in development will lead to a production
commitment or that any series programming ordered by a network or syndicator
will not be canceled due to ratings, clearances or otherwise. In addition, there
is a substantial risk that any of Dove Television's projects will not be
successful, resulting in costs not being recouped and anticipated profits not
being realized.
GROWTH AND ACQUISITION RISKS.
The Company intends to continue to actively pursue a strategy of growth
both internally through expansion of its product line and externally by the
acquisition of companies or assets. Such expansion may place substantial burdens
on the Company's management resources and financial controls and there is no
assurance that such increasing burdens will not have an adverse effect on the
Company's results of operations and financial condition or that the Company will
successfully manage such growth. In addition to the risks inherent in the
commercialization of new products, the acquisitions, in particular, may involve
a number of special risks, including adverse effects on the Company's operating
results, diversion of management's attention, dependence on hiring and training
of key personnel, risks associated with unanticipated problems or legal
liabilities and amortization of acquired intangible assets. Furthermore, there
is no assurance that the Company will be able to identify, acquire or profitably
manage additional companies or successfully integrate additional companies into
the Company without substantial costs, delays or other problems.
CERTAIN RISKS RELATING TO THE ENTERTAINMENT INDUSTRY.
The publishing, television and film industries are highly speculative
and historically have involved a substantial degree of risk. The markets for the
Company's products are also subject to rapidly changing consumer preferences,
resulting in short product life cycles
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and frequent introduction of new products, many of which are unsuccessful. The
inability to maintain a sufficient level of demand for any particular television
project, audio or published book or film may result in the expenditure of
significant funds to develop such product without corresponding revenues and
could adversely affect the Company's future operations. The Company's success
will be largely dependent on its ability to anticipate and respond to factors
affecting the industry, including the introduction of new market entrants,
demographic trends, general economic conditions, particularly as they affect
available discretionary income levels, and discount pricing and promotion
strategies by competitors. There is no assurance that the Company will be
able to anticipate and respond to changing consumer tastes and preferences and
there is a substantial risk that any of the Company's projects will not be
successful, resulting in costs not being recouped and anticipated profits not
being realized.
DEPENDENCE ON A LIMITED NUMBER OF PROJECTS.
The Company's business is dependent on its ability to acquire or develop
rights to exploit new audio, book, television and film properties that will have
broad market appeal. To date, the majority of the Company's revenues are
attributable to a small percentage of the Company's projects and the loss of a
major project in any period or the failure or less-than-expected performance of
a major product in any period, unless replaced by new projects, could have an
adverse effect on the Company's results of operation and financial condition.
POSSIBLE NEED FOR ADDITIONAL FINANCING; LIQUIDITY.
The Company's operations in general, and its publishing, television and
film operations in particular, are capital intensive. The Company anticipates,
based on currently proposed plans and assumptions relating to its operations and
anticipated outcomes of current litigation, that the projected cash flow from
operations and available cash resources, including its existing financing
arrangements, will be sufficient to satisfy its anticipated cash requirements
for at least 12 months following the date of this Prospectus. In the event that
the Company's plans change, its assumptions change or prove to be inaccurate or
the cash flow proves to be insufficient to fund operations (due to unanticipated
expenses, delays, problems, difficulties or otherwise), the Company would be
required to seek additional financing sooner than anticipated or curtail its
activities.
The Company has experienced from time to time significant negative cash
flows from operating activities which have been offset by equity and debt
financings. The Company plans to expand its audio publishing, television
production and television distribution activities and it may to continue to
experience negative cash flows from operating activities from time to time. In
such circumstances, the Company will be required to fund at least a portion of
production and distribution costs, pending receipt of anticipated future
revenues, from working capital, from additional debt or equity financings from
outside sources, or from other financing arrangements. There is no assurance
that the Company will be able to obtain such financing or that such financing,
if
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available, will be on terms satisfactory to the Company.
To the extent the Company obtains financing through sales of equity
securities, any such issuance of equity securities would result in dilution to
the interests of the Company's shareholders. Additionally, to the extent that
the Company incurs indebtedness or issues debt securities in connection with any
acquisition or otherwise, the Company will be subject to risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on any
such indebtedness.
The Company's television and film production activities can affect its
capital needs in that the revenues from the initial licensing of television
programming or films may be less than the associated production costs. The
ability of the Company to cover the production costs of particular programming
or films is dependent upon the availability, timing and amount of fees obtained
from distributors and other third parties, including revenues from foreign or
ancillary markets where available. In any event, the Company from time to time
is required to fund at least a portion of its production costs, pending receipt
of film revenues, out of its working capital or financing facilities.
In order to obtain rights to certain properties for the Company's
publishing and film operations, the Company may be required to make advance cash
payments to sources of such properties, including book authors and publishers.
While the Company generally attempts to minimize the magnitude of such payments
and to obtain advance commitments to offset such payments, the Company is not
always able to do so.
RETURNS AND REMAINDER SALES IN THE PUBLISHING INDUSTRY -- POTENTIAL EFFECT ON
RESULTS OF OPERATION AND FINANCIAL CONDITION.
In accordance with industry practice, substantially all of the Company's
sales of audio and printed book products are and will continue to be subject to
potential return by distributors and retailers if not resold to the public.
Historically, the Company has experienced significant returns and there is
no assurance that the Company will not experience returns of its audio and
printed book products in excess of its historical returns, which in certain
cases have been substantial. Although the Company makes allowances and reserves
for returned products, significant increases in return rates could materially
and adversely impact the Company's results of operations or financial condition.
In addition, the Company from time to time makes price concessions or allowances
or grants credits to distributors or retailers in order to minimize returns, and
such concessions and allowances may adversely affect the Company's operating
results. Certain of the Company's revenues are derived from sales at discount
prices of excess
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inventory of books, including returned book products, effected through
warehouse, outlet and other stores ("remainder sales"). Revenues from remainder
sales typically have not exceeded the Company's per-unit costs. The availability
of remainder product at discount prices also may have the effect of reducing
sales of full-price books, and, therefore, could adversely affect the Company's
results of operation and financial condition.
POTENTIAL FOR LIABILITY CLAIMS.
The nature of the Company's publishing business entails the risk of
liability claims, which may be heightened because of the controversial nature of
certain of its publications. The Company maintains liability insurance which it
believes is adequate to protect its assets. However, there is no assurance
that claims will not be asserted in the future, or that any damages assessed
against the Company for existing and future claims will not exceed the limits of
available insurance coverage or that adequate insurance, on terms the Company
believes are commercially reasonable, will continue to be available. In
addition, the potential negative publicity that could arise from a liability
claim could have a material adverse effect on the Company, even if the Company
were ultimately to prevail in the defense of the claim.
DEPENDENCE ON CERTAIN OUTLETS FOR PRODUCT.
For the years ended December 31, 1996 and 1995, revenues, net of
returns, as a percentage of the Company's net revenues from the Company's
customers exceeding 10% were as follows: 1996: Ingram - 9%, Barnes & Noble/B.
Dalton - 6%, CBS - 18%, MGM - 13% and ACI Pearson - 11%; 1995: Ingram - 16% and
Barnes & Noble/B. Dalton - 12%. With respect to publishing, the level of the
Company's sales of books through these and other outlets significantly depends
on shelf space allocated to such products. There is no assurance that the
Company will be able to maintain current levels of shelf space or distribution
in such chains or in other distribution outlets or that alternative distribution
channels will be available in the future. Similarly, with respect to television
product, there is no assurance that the Company will be able to distribute its
television product to such television outlets or that alternate outlets will be
available in the future. Loss of any of these retail outlets as a distribution
channel or loss of a significant amount of shelf space would have a material
adverse effect on the Company's results of operation and financial condition.
COMPETITION.
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Competition is intense within the publishing, television and motion
picture industries and between each of these industries and other entertainment
media. Many major publishing houses have established operations and the Company
anticipates increased competition in the future from major record companies. The
cost of obtaining publishing rights from popular authors is escalating and, in
many cases, obtaining such rights is beyond the Company's capital resources. The
Company expects this trend to continue. As a result, it may become more
difficult to acquire rights to "blockbuster" works by authors with past
successes. Such ability may limit the opportunities available to the Company to
publish in audio format the works of such authors. In addition, increased
competition within the publishing industry could result in greater price
competition in the sale of books. Reductions in prices of books, as a result of
competition or otherwise, would adversely affect the Company's results of
operations and financial condition.
In addition, the Company is in competition with major television
companies and film studios as well as with numerous smaller companies for the
services of performing artists, other creative and technical personnel and
creative material.
Many of the entities against which the Company competes have
substantially greater financial, personnel, technological, marketing, managerial
and other resources than the Company and have well established reputations in
the publishing, television and film industries. There is no assurance that the
Company will continue to successfully compete.
VARIABILITY OF QUARTERLY RESULTS.
The Company's operating revenues, cash flow and net earnings
historically have fluctuated significantly from quarter to quarter, depending in
large part on the delivery or availability dates of its programs and product and
the amount of related costs incurred and amortized in the period. For example,
the demand for audio books is seasonal, with the majority of shipments taking
place in the third and fourth quarters of the year. Therefore, year-to-year
comparisons of quarterly results may not be meaningful and quarterly results
during the course of a fiscal year may not be indicative of results that may be
expected for the entire fiscal year. Such fluctuations may adversely affect the
market price of the Company's Common Stock.
NATURE OF ACCOUNTING PRINCIPLES APPLICABLE TO THE PUBLISHING AND ENTERTAINMENT
INDUSTRIES.
The Company recognizes revenues from the sale of audio and printed
books, including the licensing of audio and printed book rights to third
parties, net of estimated returns and allowances, upon shipment of the product
or upon availability of the rights pursuant to the Company's licensing
arrangements. To allow for returns, the Company establishes a reserve against
revenues from audio and printed book sales, the magnitude of which is based on
management's estimate of returns. The Company's future reported revenues will be
negatively impacted if the Company's actual return experience exceeds its
established reserves. There is no assurance that the Company's actual return
experience
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will not exceed its reserves.
Audio and printed book inventory is valued at the lower of cost or
market using estimated average cost, determined using the first-in, first-out
method. If the Company's reserves for excess inventory are not adequate at any
time, the Company will be required, under generally accepted accounting
principles, to write down audio and printed book inventory, which will increase
cost of sales. Any such write-downs would have an adverse impact on the
Company's operating results. Excess inventory may arise as a result of, among
other things, customer returns. The extent of any write-downs will depend on,
among other things, the quantity of actual returns received, the level of
production and sales activity and the state and volatility of the remainder
market. The Company establishes reserves against such write-downs based on past
experience with similar products. There is no assurance that the Company's
reserve for excess inventory at any time will be adequate and that additional
write-downs will not be necessary.
Film costs, which include development, production and acquisition costs
of television programming and feature films, are capitalized and amortized, and
participations and royalties are accrued, in accordance with the individual film
forecast method in the proportion that current quarter's revenue bears to the
estimated total revenues from all sources. These costs are stated at the lower
of unamortized costs or estimated realizable value on an individual film basis.
Revenue forecasts for films are periodically reviewed by management, and the
Company's results of operations may be adversely affected as a result of a
write-down of carrying value of particular films in the event management's
estimate of ultimate revenues is materially decreased. There is no assurance
that the Company will not incur write-downs in the future in respect of its film
and television operations; any such write-downs would have an adverse impact on
operating results.
KEY PERSONNEL.
The Company may be dependent on the continued services of Ronald M.
Ziskin, who has a three-year employment agreement with the Company ending on
April 30, 1999. As the Company grows, it will also need to hire additional
qualified personnel. Competition for such personnel is intense, and the loss of
key employees or inability to hire and retain additional qualified personnel
would have a material adverse effect on the Company. In addition, the success of
the Company's audio and printed books is in large part dependent upon the
individuals with whom the Company contracts as readers and authors. The Company
does not have long-term contractual arrangements with its readers and authors,
and specific individuals may not be available with respect to particular
projects.
CONTROL BY MANAGEMENT.
As of December 29, 1997, Media Equities International, LLC ("MEI") (the
beneficial owners of which are Terrence A. Elkes, Kenneth F. Gorman, Bruce
Maggin and John T. Healy (all of whom are directors of the Company) and Ronald
Lightstone (the President and Chief Executive
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<PAGE> 15
Officer of, and a director of, the Company)), beneficially owned, in the
aggregate, approximately, 6,718,000 shares (53.49%) of the Common Stock
(including 6,218,000 shares subject to outstanding Warrants and shares issuable
upon conversion of the Company's Preferred Stock). Accordingly, MEI will
continue to be in a position to exercise significant control over the general
affairs of the Company, including the ability to elect directors, increase the
authorized capital of the Company, dissolve, merge, or sell the assets of the
Company and generally direct the affairs of the Company.
FOREIGN MARKET RISKS.
The Company is seeking to expand product sales in foreign markets
(including acting as foreign sales agent in its recently established television
distribution business). There is no assurance that the Company will be able to
expand sales in foreign markets or that such markets will prove to be viable. To
the extent that the Company is able to successfully expand its operations in
foreign markets, the Company may become increasingly subject to risks inherent
in foreign trade, including shipping delays, increased collection and currency
risks, trade restrictions, export duties and tariffs and international
political, regulatory and economic developments, all of which could have an
adverse effect on the Company's operating results. The Company has limited
experience in managing international transactions and has not historically
hedged against foreign currency fluctuation.
GOVERNMENT REGULATION.
The Federal Communications Commission ("FCC") repealed its financial
interest and syndication rules effective as of September 21, 1995. Those FCC
rules, which were adopted in 1970 to limit television network control over
television programming and thereby foster the development of diverse programming
sources, had restricted the ability of the established, major U.S. television
networks (i.e., ABC, CBS and NBC), to own and syndicate television programming.
The impact of the repeal of the FCC's financial interest and syndication rules
on the Company's operations cannot be predicted at the present time, although it
is expected that there will be a continued increase in in-house productions of
television programming for the networks' own use and potentially a decrease of
programming from independent suppliers such as the Company. It is possible that
this change will have a negative impact on the Company's business. Additionally,
in international markets, the Company may be subject to local content and quota
requirements which effectively prohibit or limit access to particular markets.
In a decision released September 1, 1995, the FCC repealed the Prime
Time Access Rule, effective August 30, 1996. The Prime Time Access Rule
generally prohibited network-affiliated television stations in the top 50
television markets from broadcasting more than three hours of network program,
or programs previously aired on a network during the four prime time viewing
hours (i.e., 7:00 p.m. -- 11:00 p.m. Eastern and Pacific times, and 6:00 p.m. --
10:00 p.m. Central and Mountain times). Due to the Prime Time Access Rule,
network-affiliated television stations often acquired a certain amount of
programming (typically
16
<PAGE> 16
including game shows) for exhibition during prime time from independent
television producers and syndicators. While the Company's sale of syndicated
programming during prime time is to both independent television stations and
network-affiliated stations, it is possible that the repeal of the Prime Time
Access Rule may constrict the market for the Company's television programming
product and that the Company might be subject to increased competition.
The impact on the Company of the changes brought about by the 1996 Act
and by accompanying changes in FCC rules cannot be predicted at the present
time, although it is expected that there will be an increase in the demand for
video programming product as a result of the likelihood that these regulatory
changes will facilitate the advent of additional exhibition sources for such
programming. However, it is possible that recent alliances of certain program
producers and television station group owners, coupled with the recent FCC rule
revisions allowing a single television station licensee to own television
stations reaching up to 35% of the nation's television households, may place
additional competitive pressures on program suppliers such as the Company, to
the extent they are unaligned with the major networks or any television station
group owners.
ABSENCE OF DIVIDENDS.
No dividends have been paid on the Common Stock to date, and the Company
does not anticipate paying dividends on the Common Stock in the foreseeable
future. In addition, the ability of the Company to pay cash dividends on the
Common Stock is restricted by the Company's working capital credit facility.
AUTHORIZATION OF PREFERRED STOCK.
The Company's Articles of Incorporation authorize the issuance of up to
2,000,000 shares of preferred stock with the designations, rights and
preferences determined from time to time by its Board of Directors. Accordingly,
the Company's Board of Directors is empowered, without shareholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting, or other
rights of the Selling Shareholders of the Common Stock. The Board of Directors
has designated 214,113 shares as Series A Preferred Stock, 5,000 shares as
Series B Preferred Stock, 5,000 shares as Series C Preferred Stock, 400,000
shares of Series D Preferred Stock and 1,500 shares as Series E Preferred Stock.
In the event of additional issuances, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying, or
preventing a change in control of the Company. See "Description of Securities."
OUTSTANDING OPTIONS AND WARRANTS.
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<PAGE> 17
As of December 30, 1997 there were outstanding options granted under the
Company's Stock Incentive Plan to purchase an aggregate of 252,500 shares of
Common Stock, at exercise prices ranging from $2.50 to $9.75 per share, an
additional 147,500 shares issuable upon exercise of options available for future
grant under the Company's Stock Incentive Plan, other options and warrants to
purchase an aggregate of 5,409,013 shares of Common Stock, at exercise prices
ranging from $.01 to $12.00 per share, 4,000 shares of Series B Preferred Stock
which are convertible into an aggregate of 2,000,000 shares of Common Stock,
1,920 shares of Series C Preferred Stock which are convertible into an aggregate
of 960,000 shares of Common Stock and 214,113 shares of Series D Preferred Stock
which is convertible into an aggregate of 258,000 shares of Common Stock. There
are also 1,500 shares of Series E Preferred Stock held in escrow which are
convertible into Common Stock only upon release from escrow. To the extent that
outstanding options or warrants are exercised or shares of Preferred Stock are
converted, the interests of the Company's shareholders immediately prior to such
exercise or conversion will be diluted. Moreover, the terms upon which the
Company will be able to obtain additional equity may be adversely affected since
the Selling Shareholders can be expected to exercise or convert the outstanding
Options, Warrants and Preferred Stock 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 by such securities.
SHARES ELIGIBLE FOR FUTURE SALE.
Substantially all of the 1,205,578 shares of Common Stock outstanding as
of the date of this Prospectus and, subject to issuance, the 7,103,263 shares of
Common Stock issuable upon exercise of outstanding Options or Warrants or
issuable upon conversion of outstanding convertible securities will be freely
tradeable in the public markets, in certain cases pursuant to a registration
statement or available exemption from registration. No prediction is made as to
the effect, if any, that sales of shares of Common Stock or even the
availability of such shares for sale will have on the market prices prevailing
from time to time. The possibility that substantial amounts of Common Stock may
be sold in the public market may adversely affect the prevailing market price
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Description of Securities --
Shares Eligible for Future Sale."
BROAD DISCRETION IN APPLICATION OF PROCEEDS.
The Company intends to use all of the net proceeds, if any, from the
exercise of the Warrants for working capital and other general corporate
purposes, including financing the acquisition of book and film properties.
Accordingly, the Company will have broad discretion as to the application of
such proceeds without shareholder approval. The Company has not determined the
specific amount of funds and the timing of any payments that may be
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<PAGE> 18
required in connection with any such acquisitions. See "Use of Proceeds."
NO ASSURANCE AS TO LIQUIDITY ON THE NASDAQ SMALLCAP MARKET.
Although the Common Stock currently trades on the Nasdaq SmallCap
Market, there is no assurance that the Common Stock will be actively traded on
such market. In addition, commencing February 23, 1998, new listing requirements
will be instituted for the Nasdaq SmallCap Market. There is no assurance that on
such date, or at any time thereafter, the Company will be able to satisfy all of
the conditions for continued listing on the Nasdaq SmallCap Market. As of
December 29, 1997, NASDAQ has not notified the Company that the Company is not
in compliance with such new listing requirements.
LEGAL PROCEEDINGS AND CLAIMS.
In August 1993, the trial court confirmed an arbitration award in favor
of the Company, Michael Viner and Jerry Leider and against Steven Stern and
Sharmhill Productions in the approximate amount of $4.5 million (plus interest
accruing thereon from September 1992 and attorney's fees) relating to the film
"Morning Glory." In March 1995, defendants appealed the judgment to the
California Court of Appeals. In June 1995, the Court of Appeals affirmed the
judgment, and that judgment is now final. In a related matter, the Company
sought to restore certain fraudulent conveyances that Mr. Stern had made. In
August 1995, Mr. Stern filed for bankruptcy protection. The United States
Trustee is pursuing the fraudulent conveyance action on behalf of the bankruptcy
estate, of which the Company comprises approximately 80%, and the Company, Mr.
Viner and Mr. Leider are separately pursuing their own adversary proceeding for
conspiracy against Mr. Stern and others in the bankruptcy case. The Company is
also objecting to Mr. Stern's discharge in bankruptcy. There is no assurance
that the Company will ultimately prevail, or as to if, when or in what amount
the Company will be able to recover the amount of the original judgment in its
favor.
In February 1993, Mr. Stern filed a complaint against the Company, Mr.
Viner and Mr. Leider entitled Steven A. Stern and Steven A. Stern as assignee of
the claims of Sharmhill Productions (B.C.), Inc., a bankrupt company v. Dove
Audio, Inc. et al. (British Columbia Supreme Court, Vancouver Registry No.
C930935) (the "Canadian Stern Action") claiming that he had been fraudulently
induced to enter into the agreement underlying the arbitration award and seeking
as damages the amount of the judgment. The Company believes that it has good and
meritorious defenses to the Canadian Stern Action. Nevertheless, there is no
assurance that the Company will prevail in the Canadian Stern Action.
In February 1996, the Company was served with a complaint in an action
entitled Robert H. Tourtelot v. Dove Audio, Inc. etc. et al. (Los Angeles
Superior Court Case No. SC040739) (the "Tourtelot Action"). Mr. Tourtelot seeks
in excess of a million dollars in damages claiming that he had an oral agreement
with the Company to write a book that the Company would publish, and that
information he provided to the Company was used in another book published by the
Company, "Legacy of Deception." Mr. Tourtelot alleged causes of action for
breach of oral
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<PAGE> 19
contract, fraud, suppression of fact, breach of the implied covenant of good
faith and fair dealing, breach of fiduciary duty, infringement of common law
copyright, conversion, conspiracy and accounting. The Company successfully
removed the action to the United States District Court for the Central District
of California, and successfully moved to have the claims for infringement of
common law copyright, breach of fiduciary duty, conversion, conspiracy and
accounting dismissed. The Tourtelot Action was then remanded to the Los Angeles
Superior Court, which has permitted Mr. Tourtelot to pursue claims for breach of
oral contract, fraud, suppression of fact, breach of the implied covenant of
good faith and fair dealing, breach of fiduciary duty, conversion, conspiracy
and quantum meruit. While the Company believes that it has good and meritorious
defenses to the Tourtelot Action, there is no assurance that the Company will
prevail in the Tourtelot Action.
In March 1996, the Company was served with a complaint in an action
entitled Alexandra D. Datig v. Dove Audio, et al. (Los Angeles Superior Court
Case No. BC145501) (the "Datig Action"). The Datig Action was brought by a
contributor to, and relates to, the book "You'll Never Make Love In This Town
Again." The Datig complaint sought in excess of a million dollars in monetary
damages. In October 1996, the Company obtained a judgment of dismissal of the
entire Datig Action, which judgment also awarded the Company its attorney's fees
and costs in defending the matter. Thereafter, the Company sued Ms. Datig for
malicious prosecution. Ms. Datig, however, has appealed the judgment. While the
Company believes that it will prevail on the appeal, there is no assurance that
the Company will in fact be successful on appeal.
In July 1996, the Company was served with a complaint in an action
entitled Terrie Maxine Frankle and Jennie Louise Frankle v. Dove Audio (U.S.
District Court, Central District of California Case No. 96-4073 RSWL) (the
"Frankle Action"). The Frankles claim to be the authors of "You'll Never Make
Love In This Town Again," and have alleged claims for copyright infringement and
fraud. The Frankles' application for a preliminary injunction was denied because
they could not demonstrate a likelihood of success on the merits of their
claims. The Company believes that it has good and meritorious defenses and
counterclaims against the Frankles. Nevertheless, there is no assurance that the
Company will prevail.
In May 1997, the Company was served with a complaint in an action
entitled Kenneth Raskoff v. Dove (Los Angeles Superior Court Case No. BC171355)
(the "Raskoff Action"). Mr. Raskoff is a former employee of Dove Television. The
complaint seeks unspecified damages and other relief for breach of Mr. Raskoff's
alleged employment contract, breach of the implied covenant of good faith and
fair dealing, breach of implied-in-fact contract, promissory estoppel, and
fraudulent inducement. The complaint also seeks an injunction requiring that Mr.
Raskoff receive producer credit with respect to the television program entitled
"Unwed Father" and other unnamed projects. Although the Company believes that it
has good and meritorious defenses to the Raskoff Action, there is no assurance
that the Company will prevail in the action.
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<PAGE> 20
In June 1997, the Company was served with a complaint in an action entitled
Michael Bass v. Penguin USA Inc., et al. (New York Superior Court Case No.
97-111143) (the "Bass Action"). The complaint alleges among other things that
the contribution of Liza Greer (one of the authors) to the book "You'll Never
Make Love In This Town Again" defames Mr. Bass and violates his rights of
publicity under New York statutes. The complaint seeks damages of $70,000,000
for defamation and $20,000,000 for violation of the New York right of publicity
statutes and an injunction taking the book out of circulation and prohibiting
the use of Mr. Bass' name. The Company believes that it has good and meritorious
defenses to the Bass Action. Nevertheless, there is no assurance that the
Company will prevail. As a result of the Bass Action, the Company has brought a
cross-complaint against Ms. Greer.
In July 1997, Michael Viner and Deborah Raffin Viner (the "Former
Principals") commenced an arbitration against the Company. In their arbitration
demand, the Former Principals claim that they are owed in excess of $1 million
by the Company relating to the motion picture entitled "Morning Glory". The
Former Principals claim that they are also entitled to the repayment of certain
deferred amounts for producing and acting services rendered by them in
connection with "Morning Glory" and to 50% of the profits. They claim that a
former director of the Company, Gerald Leider, is entitled to the other 50% of
the profits. The Former Principals have also asserted that from any recovery of
a judgment confirming an arbitration award against Steven Stern and/or Sharmhill
Productions relating to "Morning Glory" (the "Stern Judgment") they are entitled
to receive $1 million, as well as the deferred amounts and 50% of the profits.
Present management believes it has good and sufficient defenses to the claims,
including, but not limited to the Former Principals' waiver of their claims that
any amounts are owed to them as debt, as profit participation or as deferred
compensation and that the Company has not yet recouped its investment in the
Picture. The company has also asked the arbitrator to determine that the Former
Principals are not entitled to any moneys or rights with respect to "Morning
Glory", including from the proceeds of the Stern Judgment. There is no
assurance that the Company will prevail on these defenses and claims.
In August 1997, the Former Principals commenced an arbitration against
the Company seeking specific performance of, and alleging breach of, a
termination agreement to which they and the Company are a party (the
"Termination Agreement"). The Former Principals subsequently identified in
writing their intention to arbitrate a variety of miscellaneous claims,
including the Company's alleged failure to timely pay the full amount of
consulting fees under the Termination Agreement, as well as the Producer and
Executive Producer fees on "Unwed Father", to reimburse charitable
contributions, business expenses, medical expenses, to return certain personal
property, to account for sales with respect to certain titles, and other
matters, including claims that the Former Principals did not receive appropriate
credit on "Unwed Father" and various audio books that they have not yet
identified. On October 16, 1997, however, the Former Principals filed an action
in the Los Angeles Superior Court (Case No. BC179639) for "Breach of Written
Contract; Specific Performance; Temporary Restraining Order, Preliminary
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<PAGE> 21
and Permanent Injunctive Relief" which sought damages for some of the same
claims identified as the Former Principals' claims in arbitration. In this
action the Former Principals claimed that, in addition to other damages, they
were entitled to accelerate all payments to become due under the Termination
Agreement, in the aggregate amount of $1,511,824 and to the rights to certain
titles. This action appears to have been filed for purposes of obtaining an
attachment. After the Company obtained a temporary restraining order in the
action staying the arbitration, the Former Principals and Dove II filed another
action in the Los Angeles Superior Court (Case No. BC 180301) seeking
declaratory relief and an injunction staying other arbitration proceedings
between them and the Company. After the Company defeated an application for
temporary restraining order in that action, the Former Principals and Dove II
filed requests for dismissals of both actions and are proceeding in the
arbitrations. The Former Principals also claim that their agreement not to
compete with the Company in the book and audio business is not enforceable. The
Company believes that, with the exception of certain immaterial amounts which it
expects to pay, it has good and meritorious defenses to the claims by the Former
Principals and that the Company has meritorious claims against the Former
Principals. There is no assurance, however, that the Company will prevail on
these issues and claims.
In July 1997, the Company was served with a complaint in an action
entitled Alan Fields v. Dove Entertainment, Inc., et al. (Los Angeles Superior
Court No. BC 174659) (the "Fields Action"). The Fields Action was brought by an
alleged purchaser of Common Stock against the Company and the Former Principals
as a putative class action on behalf of all persons who acquired Common Stock
between July 25, 1995 and August 20, 1996. The complaint alleges a cause of
action for violation of Section 25400(d) of the California Corporations Code
based on the alleged dissemination of false and misleading statements about,
among other things, the success of the Company's printed book operations,
financial results, business condition and future prospects. The plaintiff seeks
unspecified damages and other relief. In August 1997, an action entitled Global
Asset Allocation consultants, L.L.C. v. Dove Entertainment, Inc., et al. (Civil
Action No. 97-6253-WDK) (the "Global Asset Action"), was commenced against the
Company and the Former Principals in the United States District Court for the
Central District of California. The Global Asset Action was brought by an
alleged purchaser of Common Stock as a putative class action on behalf of all
persons who acquired Common Stock between July 25, 1995 and August 20, 1996. The
complaint alleges a cause of action for violation of Section 10(b) of the
Securities and Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder
based on the conduct at issue in the Fields Action. The plaintiff seeks
unspecified damages and other relief. The Company has learned that another
putative federal securities class action was filed in the United States District
Court for the Central District of California by an alleged purchase of Common
Stock represented by the law firm of Berman, DeValerio & Pease LLP (the "Berman
Action"; and collectively with the Fields Action and the Global Asset Action,
the "Securities Actions"). The complaint is reportedly brought on behalf of all
persons who acquired Common Stock between April 15, 1996 and October 10, 1996
and to allege a cause of action against the Company and certain of its former
officers for violation of Section 10(b) of the Securities Exchange Act of 1934
and SEC Rule 10b-5
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promulgated thereunder. As of September 30, 1997, the Company has not been
served with the complaints in the Global Asset Action or the Berman Action. The
Company has not yet filed a response to the complaints in the Securities
Actions. While the Company believes it has good and meritorious defenses against
the claim, the Company has taken a charge of $150,000 in the quarter ended June
30, 1997 in respect of potential costs associated with the claim.
In July 1997, the Company was served with a complaint in an action
entitled Steven A. Soloway v. Dove Entertainment, Inc., etc. et al. (Los Angeles
Superior Court Case No. BC 175516) (the "Soloway Action"). Mr. Soloway is a
former director and employee of the Company and has sought damages of
approximately $350,000 for breach of contract. Mr. Soloway claims that as a
result of the Securities Purchase Agreement he was entitled to declare his
employment agreement terminated without cause and to receive his base salary
through September 1999. In September 1997, Mr. Soloway obtained a writ of
attachment for $350,000 in respect of his claims, for which the Company has
substituted an undertaking for the amount of the attachment. Although the
Company believes that it has good and meritorious defenses and setoffs to the
Soloway Action, there is no assurance that the Company will prevail in the
Soloway Action. The Company has filed a cross-complaint against Mr. Soloway for
breach of fiduciary duty and legal malpractice.
On November 4, 1997, James Belasco, a former director of the Company,
filed an action against the Company in Los Angeles County Superior Court
entitled James A. Belasco v. Dove Entertainment, Inc. etc. et al. LASC case no.
BC 180707. Mr. Belasco seeks to recover over $178,000 that he claims he is owed
for royalties from the distribution of the book entitled "Flight of the
Buffalo: Soaring to Excellence. Learning to Let Employees Lead." Mr. Belasco
also seeks punitive damages. On November 4, 1997, James Belasco filed an action
against the Company in Los Angeles County Superior Court entitled James A.
Belasco v. Dove Entertainment, Inc. etc. et al. LASC case no. BC 180706. Mr.
Belasco alleges that the Company has interfered with the publication of the
work entitled "The Phoenix Organization." Mr. Belasco seeks punitive damages
and over $200,000 in general damages. Although the Company believes that it has
good and meritorious defenses to such actions, there is no assurance that the
Company will prevail in these actions.
In December of 1997, the Company was served with a complaint in an
action entitled Gerald J. Leider v. Dove Entertainment, Inc. fka Dove Audio,
Inc. (Los Angeles Superior Court Case No. BC183056). Mr. Leider is a former
Chairman of the Board of, and consultant to, the Company and has sought damages
of approximately $287,000 for breach of contract and $60,000 for unpaid
consulting fees. Mr. Leider also is seeking a declaration that the Company must
comply with certain stock option agreements and for an order for inspection and
copying of certain records of the Company and an award of expenses related
thereto. Although the Company believes that it has good and meritorious defenses
to such action, there is no assurance that the Company will prevail in such
action.
In addition to the above claims, the Company is a party to various other
routine legal proceedings and claims incidental to its business.
There is no assurance that the ultimate outcome of these matters
will be resolved in favor of the Company. In addition, even if the ultimate
outcome is resolved in favor of the Company, involvement in any litigation or
claims could entail considerable cost to the Company and the diversion of the
attention of management, either of which could have a material adverse effect on
the business of the Company.
USE OF PROCEEDS
The Company will use the proceeds received from the exercise of the
Warrants, if any, for working capital and general corporate purposes. The
Company will receive no proceeds from the sale of the Shares pursuant to this
Prospectus.
The Company expects to continue to use a significant amount of its
working capital to finance its development, production and distribution
activities both domestically and in international markets.
The Company from time to time considers the acquisition of assets or
businesses complimentary to its current operations and may use a portion of the
net proceeds for such purposes. However, the Company does not have pending any
agreements for the acquisition of any business nor has it allocated any portion
of the net proceeds for any specific acquisitions.
SELLING SHAREHOLDERS
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The following table sets forth the Selling Shareholders and certain
information as of December 30, 1997. It is unknown if, when, or in what
amounts a Selling Shareholder may offer Shares for sale. None of the Selling
Shareholders has held any position or office or held any other material
relationship with the Company or any of its affiliates within the past three
years, other than (a) Ronald Lightstone, who is currently the President and
Chief Executive Officer of the Company and a member of the Board of Directors,
(b) John T. Healy, Bruce Maggin, Terrence A. Elkes and Kenneth F. Gorman, who
are currently members of the Board of Directors of the Company, (c) Ron Ziskin,
who is currently President of Dove Television, (d) Shukri Ghalayini, who was
formerly President of Dove Television, (e) Kaye, Scholer, Fierman, Hays &
Handler, LLP which is one of the Company's outside counsel, (f) Sydney Sheldon,
who was formerly a director of the Company and (g) Lee Ruttenberg, who was a
former consultant to the Company.
There is no assurance that the Selling Shareholders will sell any or all
of the Shares offered hereby, that any of the Warrants or Options will be
exercised or any Preferred Stock will be converted or that any Shares issued
upon exercise of the Warrants or conversion of the Preferred Stock, if any, will
be sold by any of the Selling Shareholders. To the extent required, the public
offering price of the Shares to be sold, the names of any agent, dealer or
underwriter employed by such Selling Shareholders in connection with such sale,
and any applicable commission or discount with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement.
The Shares covered by this Prospectus may be sold from time to time so
long as this Prospectus remains in effect; provided, however, that the Selling
Shareholder is first required to contact the Company's Corporate Secretary to
confirm that this Prospectus is in effect. Although the Company will use its
best efforts to maintain this Prospectus in effect for up to three years, there
is no assurance that such will be the case. Since a Selling Shareholder may
be liable if he sells Shares when this Prospectus is not in effect, the Company
requires each Selling Shareholder to contact it to confirm that this Prospectus
is then in effect prior to any sale of Shares. The Selling Shareholders expect
to sell the Shares at prices then attainable, less ordinary brokers commissions
and dealers' discounts as applicable.
The Selling Shareholders and any broker or dealer to or through whom any
of the Shares are sold may be deemed to be underwriters within the meaning of
the Securities Act with respect to the Shares offered hereby, and any profits
realized by the Selling Shareholders or such brokers or dealers may be deemed to
be underwriting commissions. Brokers' commissions and dealers' discounts, taxes
and other selling expenses to be borne by the Selling Shareholders are not
expected to exceed normal selling expenses for sales over-the-counter or
otherwise, as the case may be. The registration of the Shares under the Act
shall not be deemed an admission by the Selling Shareholders or the Company that
the Selling Shareholders are underwriters for purposes of the Act of any Shares
offered under this Prospectus.
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SELLING SHAREHOLDER LIST
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF COMMON STOCK
INVESTOR BEFORE OFFERED
OFFERING
<S> <C> <C>
Media Equities International, LLC (1) 6,718,000 6,218,000
Ronald Lightstone (2) 4,179,930 400,000
Morgan Fuller Capital Group, LLC (3) 180,000 180,000
Ron Ziskin (4) 351,757 351,757
Shukri Ghalayini (5) 268,424 268,424
RafiicSaadeh 23,760 23,760
Transcorp - c/f Alexander S. Lushtak - IRA (6) 63,158 63,158
Lushtak Family Limited Partnership #1 (7) 98,684 98,684
Anatoly Tikhman (8) 153,947 153,947
Dunhill Entertainment 11,111 11,111
Tin Man Enterprises 240,000 240,000
Kaye, Scholer, Fierman, Hays & Handler, LLP 50,000 50,000
Lee Ruttenberg 52,500 50,000
Sydney Sheldon (9) 634,913 200,000
</TABLE>
(1) Represents 500,000 shares of issued and outstanding Common Stock, which
has previously been registered, 3,218,000 shares of Common Stock
issuable by the Company upon conversion of the Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock and 3,000,000
shares of Common Stock issuable by the Company upon exercise of warrants
to purchase shares of Common Stock. Only the shares of Common Stock
issuable upon conversion of the Preferred Stock or exercise of the
warrants are being offered hereunder. MEI acquired the Preferred Stock
and warrants from the Company in private placements in 1997 and,
subsequently, from the other purchasers in such private placements. See
"Description of Securities - Preferred Stock and - Warrants; Options."
After the completion of the offering hereby (assuming the sale by MEI of
all the shares of Common Stock registered for it as part of the
registration statement of which this Prospectus is part), MEI will
beneficially own 500,000 shares of Common Stock or approximately 4% of
the outstanding shares of Common Stock.
(2) Includes 3,779,930 shares attributable to Mr. Lightstone due to his
ownership interest in MEI and 400,000 shares of Common Stock that may be
issued by the Company to Mr. Lightstone as compensation under an
employment agreement. It is anticipated that Mr. Lightstone's ownership
interest in such 400,000 shares will be subject to a vesting schedule.
Only the 400,000 shares of Common Stock that may be issued as
compensation are being offered hereunder. After the completion of the
offering hereby (assuming the sale by Mr. Lightstone of all of the
shares of Common Stock registered for him as part of the registration
statement of which this Prospectus is a part and taking into account
shares beneficially owned through MEI), Mr. Lightstone will beneficially
own 3,779,930 shares of Common Stock or approximately 30%.
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<PAGE> 25
(3) Represents 180,000 shares of Common Stock issuable by the Company upon
exercise of warrants to purchase shares of Common Stock, over a period
of three years commencing October 1996 at an exercise price of $2.75,
which Morgan Fuller received as compensation for certain financial
advisory services to the Company. See "Description of Securities -
Warrants; Options".
(4) Represents 201,757 shares of Common Stock received by Mr. Ziskin in
connection with the merger of Four Point Entertainment, Inc. and Dove
Four Point, Inc. and 150,000 shares of Common Stock issuable by the
Company upon exercise of options to purchase shares of Common Stock,
which options were acquired in connection with such merger. As of
December 29, 1997, the actual number of shares of Common Stock issuable
upon exercise of such options was 300,000 (at an exercise price of
$11.00 per share); however, the Company and Mr. Ziskin have agreed to
reset the exercise price of such options and reduce the number of shares
issuable upon exercise to 150,000. As of December 29, 1997, the Company
has not repriced such options.
(5) Represents 201,757 shares of Common Stock received by Mr. Ghalayini in
connection with the merger of Four Point Entertainment, Inc. and Dove
Four Point, Inc. and 66,667 shares of Common Stock received by Mr.
Ghalayini in settlement of certain litigation between Mr. Ghalayini and
the Company.
(6) Represents 42,105 shares of Common Stock and 21,053 shares of Common
Stock issuable by the Company upon exercise of warrants to purchase
Common Stock. Such shares and warrants were issued as part of a private
placement by Morgan Fuller Capital Group in March of 1997. See
"Description of Securities Warrants; Options".
(7) Represents 65,789 Shares of Common Stock and 32,895 shares of Common
Stock issuable by the Company upon exercise of warrants to purchase
Common Stock. Such shares and warrants were issued as part of a private
placement by Morgan Fuller Capital Group in March 1997. See "Description
of Securities - Warrants; Options".
(8) Represents 102,632 shares of Common Stock and 51,315 shares of Common
Stock issuable by the Company upon exercise of warrants to purchase
Common Stock. Such shares and warrants were issued as part of a private
placement by Morgan Fuller Capital Group in March of 1997. See
"Description of Securities - Warrants; Options".
(9) After the completion of the offering hereby (assuming the sale by Mr.
Sheldon of all of the shares of Common Stock registered for him as part
of the registration statement of which this prospectus is a part), Mr.
Sheldon will beneficially own 434,913 shares of Common Stock or
approximately 7% of the outstanding shares of Common Stock. Except for
MEI, Ronald Lightstone and Sydney Sheldon, all Selling Shareholders own
less than 1% of the outstanding shares of Common Stock after completion
of the offering, assuming the sale of all of the shares of Common Stock
registered as part of the registration statement of which this
Prospectus is a part.
PLAN OF DISTRIBUTION
This Prospectus covers up to 8,308,841 shares of the Company's
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<PAGE> 26
Common Stock. All of the Shares offered hereby are being sold by the Selling
Shareholders. The Company will receive no proceeds from the sale of the Shares
by the Selling Shareholders. The Company will receive proceeds upon the
exercise, if any, of any of the Warrants or Options, except in certain cases if
such Warrants or Options are exercised pursuant to the "net" or cashless
exercise provisions thereof. The Company will not receive any proceeds from the
conversion of the Preferred Stock into Common Stock.
MEI has informed the Company that it has no present intention of selling
any of the shares of Common Stock registered for it as part of the registration
statement of which this prospectus is a part, within the next two years.
The distribution of the Shares by the Selling Shareholders is not
subject to any underwriting agreement. The Selling Shareholders may sell the
Shares offered hereby from time to time in transactions in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale or
otherwise, at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of the
customary commissions). The Selling Shareholders and any broker-dealers that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be underwriters and any commissions received by them and any profit
on the resale of the Shares commissioned by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The Selling
Shareholders will pay any transaction costs associated with effecting any sales
that occur.
If any Selling Shareholder sells his, her or its Shares, or options
thereon, pursuant to this Prospectus at a fixed price or at a negotiated price
which is, in either case, other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Shareholder pays
compensation to a broker-dealer that is other than the usual and customary
discounts, concessions or commissions, or if there are any arrangements either
individually or in the aggregate that would constitute a distribution of the
Shares held by a Selling Shareholder, to the extent required, the number of
Shares to be sold, the respective purchase price and public offering price, the
name of any agent, dealer broker or underwriter and any applicable commissions
or discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. The Company is under no obligation to file a
post-effective amendment to the registration statement of which this Prospectus
is a part under such circumstances.
The Selling Shareholders are not restricted as to the price or prices at
which they may sell their Shares. Sales of such Shares may have an adverse
effect on the market price of the Common Stock. Moreover, some of the Selling
Shareholders are not restricted as to the number of Shares that may be sold at
any one time, and it is possible that a significant number of Shares could be
sold at the same time which may also have an adverse effect on the market price
of the Company's Common Stock.
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<PAGE> 27
DESCRIPTION OF SECURITIES
The following description of the Company's securities is not complete
and is qualified in all respects by the provisions of the Company's Articles of
Incorporation and its Amended and Restated Bylaws, copies of which have been
attached as exhibits to the documents incorporated herein by reference and to
which reference is made for a detailed description of the provisions thereof
summarized below.
GENERAL
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.01 par value per share and 2,000,000 shares of
preferred stock, $.01 par value per share, of which 214,113 shares have been
designated as Series A Preferred Stock, 5,000 shares have been designated as
Series B Preferred Stock, 5,000 shares have been designated as Series C
Preferred Stock, 400,000 shares have been designated Series D Preferred Stock,
and 1,500 shares have been designated Series E Preferred Stock. As of December
30, 1997, there were outstanding 6,301,544 shares of Common Stock, 4,000 shares
of Series B Preferred Stock, 1,920 shares of Series C Preferred Stock, 214,113
shares of Series D Preferred Stock and 1,500 shares of Series E Preferred Stock
(which shares of Series E Preferred Stock are in escrow).
COMMON STOCK
Each share of Common Stock entitles the holder thereof to vote on all
matters submitted to the shareholders; in electing directors, however, each
shareholder is entitled to cumulate votes for any candidate if, prior to the
voting, such candidate's name has been placed in nomination and any shareholder
has given notice of an intention to cumulate votes. The Common Stock is not
subject to redemption or to liability for further calls. Selling Shareholders of
Common Stock will be entitled to receive such dividends as may be declared by
the Board of Directors of the Company out of funds legally available therefor
and to share pro rata in any distribution to shareholders. The shareholders have
no conversion, preemptive or other subscription rights. Shares of authorized and
unissued Common Stock are issuable by the Company Board without any further
shareholder approval.
PREFERRED STOCK
Pursuant to the Company's Articles of Incorporation, the Company is
authorized to issue "blank check" preferred stock, which may be issued from time
to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the shareholders,
is authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
preferred stock. The issuance of additional preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
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<PAGE> 28
purposes could, among other things, adversely affect the voting power of the
holders of Common Stock and Preferred Stock and, under certain circumstances,
make it more difficult for a third party to gain control of the Company,
discourage bids for the Company's Common Stock at a premium or otherwise
adversely affect the market price of the Common Stock.
SERIES A PREFERRED STOCK.
On April 9, 1997, the Company exchanged 214,113 shares of the Series A
Preferred Stock (constituting the entire amount of the issued and outstanding
number of shares of Series A Preferred Stock) for 214,113 shares of newly issued
Series D Preferred Stock.
SERIES B PREFERRED STOCK.
The holders of the Series B Preferred Stock are entitled to vote
together with all other voting classes and series of stock of the Company as a
single class on all actions to be taken by the shareholders of the Company
except that the holders of the Series B Preferred Stock are not entitled to vote
on the election of directors except as a separate class as follows: the holders
of the outstanding shares of the Series B Preferred Stock, voting as a separate
class, are entitled to elect 1/3 of the directors of the Company so long as the
initial holders of the Series B Preferred Stock as of the date of the initial
issuance of the Series B Preferred Stock (the "Initial Holders") hold of record
not less than an aggregate of 750,000 shares of Common Stock (assuming for such
purpose that all shares of Series B Preferred Stock that the Initial Holders are
then record holders of are converted in their entirety into shares of Common
Stock) and the Initial Holders hold a majority of the outstanding Series B
Preferred Stock. A vacancy in any directorship elected by the holders of the
Series B Preferred Stock must be filled by the vote or written consent of the
holders of the Series B Preferred Stock. Each share of Series B Preferred Stock
entitles the holder thereof to such number of votes per share on each such
action as to which the Series B Preferred Stock votes together with such other
classes as shall equal the number of shares of Common Stock into which each
share of Series B Preferred Stock is then convertible on the record date for
such action.
The Company is not permitted to change the maximum number of directors
constituting the board of directors to a number greater than nine (9) without
the written consent or affirmative vote of the holders of at least a majority of
the outstanding shares of Series B Preferred Stock.
The holders of Series B Preferred Stock are entitled to receive, prior
and in preference to any declaration or payment of any dividend on any shares of
any class or series of Common Stock, dividends at an annual rate per share equal
to six percent (6%) multiplied by $1,000 (the "Series B Stated Value") for so
long as the Series B Preferred Stock is outstanding or, if earlier, March 28,
2001, payable, at the Company's option, from time to time, in cash or in shares
of Series B Preferred Stock, payable annually. Such dividends accrue on each
share of Series
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<PAGE> 29
B Preferred Stock on a daily basis, whether or not earned or declared, and are
cumulative, and to the extent not paid, accrue interest on each share of Series
B Preferred Stock, whether earned or declared on a cumulative basis, at an
annual rate per share equal to 6%, compounded quarterly, from the date such
dividends were first payable until the date such dividends are paid. So long as
accumulated dividends with respect to the Series B Preferred Stock remain
unpaid, the Company may not pay any dividends or make any distribution on its
capital stock (other than dividends payable solely in equity securities of the
Company), and the Company may not purchase or otherwise acquire or redeem any
securities junior in preference to the Series B Preferred Stock.
The Series B Preferred Stock bears a preference upon dissolution or
liquidation of the Company in an amount equal to the Series B Stated Value plus
all accumulations of unpaid dividends and interest accruing thereon. The Series
B Preferred Stock is redeemable at the option of the Company, at any time after
March 28, 2002, at a redemption price equal to 110% of the Series B Stated Value
plus all accumulated unpaid dividends and interest accruing thereon.
The Series B Preferred Stock is convertible at the option of the holder,
at any time commencing six months after the date of issuance, at an initial
conversion ratio (the "Series B Conversion Ratio") of 500 shares of Common Stock
per share of Series B Preferred Stock. The Series B Conversion Ratio is subject
to adjustment in the event of the issuance by the Company of certain securities,
or rights to acquire securities, which, in general, have a dilutive effect upon
the outstanding capital stock of the Company. In addition, the Series B
Conversion Ratio is subject to adjustment in the event of a subdivision or
combination of the outstanding shares of Common Stock or in the event of the
reclassification of the capital stock of the Company or a reorganization of the
Company.
So long as shares of Series B Preferred Stock are outstanding, the
Company may not, without the approval of at least a majority of the then
outstanding shares of Series B Preferred Stock voting as a class, (i) alter or
change the rights, preferences or privileges of the shares of Series B Preferred
Stock so as to affect adversely such shares, (ii) amend its Articles of
Incorporation so as to affect adversely the shares of Series B Preferred Stock
(except that the Company may authorize or increase the number of authorized
shares of Common Stock), or (iii) increase the authorized number of shares of
Series B Preferred Stock, issue any class or series of equity securities senior
or pari passu to the Series B Preferred Stock (except for Series C Preferred
Stock and Series D Preferred Stock and dividends accruing thereon) in connection
with rights upon liquidation or dissolution of the Company, or reissue any
shares of Series B Preferred Stock that may be acquired by the Company by reason
of redemption, purchase, or otherwise.
So long as the Initial Holders hold of record not less than an aggregate
of 750,000 shares of Common Stock (assuming that all shares of Series B
Preferred Stock of which the Initial Holders are then record holders are
converted in their entirety into shares of Common Stock and subject to
adjustments) and the Initial Holders hold a majority of the
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<PAGE> 30
outstanding Series B Preferred Stock, the Company may not, without the approval
of the holders of at least a majority of the outstanding shares of Series B
Preferred Stock, merge with or acquire any other entity or sell all or
substantially all of the assets of the Company.
SERIES C PREFERRED STOCK.
The holders of the Series C Preferred Stock are entitled to vote
together with all other voting classes and series of stock of the Company as a
single class on all actions to be taken by the shareholders of the Company. Each
share of Series C Preferred Stock entitles the holder thereof to such number of
votes per share on each such action as to which the Series C Preferred Stock
votes together with such other classes as shall equal the number of shares of
Common Stock into which each share of Series C Preferred Stock is then
convertible on the record date for such action.
The holders of Series C Preferred Stock are entitled to receive, prior
and in preference to any declaration or payment of any dividend on any shares of
any class or series of Common Stock, dividends at an annual rate per share equal
to six percent (6%) multiplied by $1,000 (the "Series C Stated Value") for so
long as the Series C Preferred Stock is outstanding or, if earlier, March 28,
2001, payable, at the Company's option, from time to time, in cash or in shares
of Series C Preferred Stock, payable annually. Such dividends accrue on each
share of Series C Preferred Stock on a daily basis, whether or not earned or
declared, and are cumulative, and to the extent not paid, accrue interest on
each share of Series C Preferred Stock, whether earned or declared on a
cumulative basis, at an annual rate per share equal to six percent (6%),
compounded quarterly, from the date such dividends were first payable until the
date such dividends are paid. So long as accumulated dividends with respect to
the Series C Preferred Stock remain unpaid, the Company may not pay any
dividends or make any distribution on its capital stock (other than dividends
payable solely in equity securities of the Company), and the Company may not
purchase or otherwise acquire or redeem any securities junior in preference to
the Series C Preferred Stock.
The Series C Preferred Stock bears a preference upon dissolution or
liquidation of the Company in an amount equal to the Series C Stated Value plus
all accumulations of unpaid dividends and interest accruing thereon. The Series
C Preferred Stock is redeemable at the option of the Company, at any time after
March 28, 2002, at a redemption price equal to 110% of the Series C Stated Value
plus all accumulated unpaid dividends and interest accruing thereon.
The Series C Preferred Stock is convertible at the option of the holder,
at any time commencing six months after the date of issuance, at an initial
conversion ratio (the "Series C Conversion Ratio") of 500 shares of Common Stock
per share of Series C Preferred Stock. The Series C Conversion Ratio is subject
to adjustment in the event of the issuance by the Company of certain securities,
or rights to acquire securities, which, in general, have a dilutive effect upon
the outstanding capital stock of the Company. In addition, the Series C
Conversion Ratio is subject to adjustment in
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<PAGE> 31
the event of a subdivision or combination of the outstanding shares of Common
Stock or in the event of the reclassification of the capital stock of the
Company or a reorganization of the Company.
So long as shares of Series C Preferred Stock are outstanding, the
Company may not, without the approval of at least a majority of the then
outstanding shares of Series C Preferred Stock voting as a class, (i) alter or
change the rights, preferences or privileges of the shares of Series B Preferred
Stock so as to affect adversely such shares, (ii) amend its Articles of
Incorporation so as to affect adversely the shares of Series C Preferred Stock
(except that the Company may authorize or increase the number of authorized
shares of Common Stock), or (iii) increase the authorized number of shares of
Series C Preferred Stock, issue any class or series of equity securities senior
or pari passu to the Series C Preferred Stock (except for Series B Preferred
Stock and Series D Preferred Stock and dividends accruing thereon) in connection
with rights upon liquidation or dissolution of the Company, or reissue any
shares of Series C Preferred Stock that may be acquired by the Company by reason
of redemption, purchase, or otherwise.
SERIES D PREFERRED STOCK.
The holders of the Series D Preferred Stock are entitled to vote
together with all other voting classes and series of stock of the Company as a
single class on all actions to be taken by the shareholders of the Company. Each
share of Series D Preferred Stock entitles the holder thereof to such number of
votes per share on each such action as to which the Series D Preferred Stock
votes together with such other classes as shall equal the number of shares of
Common Stock into which each share of Series D Preferred Stock is then
convertible on the record date for such action.
The holders of Series D Preferred Stock are entitled to receive, prior
and in preference to any declaration or payment of any dividend on any shares of
any class or series of Common Stock, dividends at an annual rate per share equal
to six percent (6%) multiplied by $4.00 (the "Series D Stated Value") for so
long as the Series D Preferred Stock is outstanding or, if earlier, March 28,
2001, payable, at the Company's option, from time to time, in cash or in shares
of Series D Preferred Stock, payable annually. Such dividends accrue on each
share of Series D Preferred Stock on a daily basis, whether or not earned or
declared, and are cumulative, and to the extent not paid, accrue interest on
each share of Series D Preferred Stock, whether earned or declared on a
cumulative basis, at an annual rate per share equal to six percent (6%),
compounded quarterly, from the date such dividends were first payable until the
date such dividends are paid. So long as accumulated dividends with respect to
the Series D Preferred Stock remain unpaid, the Company may not pay any
dividends or make any distribution on its capital stock (other than dividends
payable solely in equity securities of the Company), and the Company may not
purchase or otherwise acquire or redeem any securities junior in preference to
the Series D Preferred Stock.
The Series D Preferred Stock bears a preference upon dissolution
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<PAGE> 32
or liquidation of the Company in an amount equal to the Series D Stated Value
plus all accumulations of unpaid dividends and interest accruing thereon. The
Series D Preferred Stock is redeemable at the option of the Company, at any time
after March 28, 2002, at a redemption price equal to 110% of the Series D Stated
Value and all accumulated unpaid dividends and interest accruing thereon.
The Series D Preferred Stock is convertible at the option of the holder,
at any time, at an initial conversion ratio (the "Series D Conversion Ratio") of
1.20497 shares of Common Stock per share of Series D Preferred Stock. The Series
D Conversion Ratio is subject to adjustment in the event of the issuance by the
Company of certain securities, or rights to acquire securities, which, in
general, have a dilutive effect upon the outstanding capital stock of the
Company. In addition, the Series D Conversion Ratio is subject to adjustment in
the event of a subdivision or combination of the outstanding shares of Common
Stock or in the event of the reclassification of the capital stock of the
Company or a reorganization of the Company.
So long as shares of Series D Preferred Stock are outstanding, the
Company may not, without the approval of at least a majority of the then
outstanding shares of Series D Preferred Stock voting as a class, (i) alter or
change the rights, preferences or privileges of the shares of Series D Preferred
Stock so as to affect adversely such shares, (ii) amend its Articles of
Incorporation so as to affect adversely the shares of Series D Preferred Stock
(except that the Company may authorize or increase the number of authorized
shares of Common Stock), or (iii) increase the authorized number of shares of
Series D Preferred Stock, issue any class or series of equity securities senior
or pari passu to the Series D Preferred Stock (except for Series B Preferred
Stock and Series C Preferred Stock) in connection with rights upon liquidation
or dissolution of the Company, or reissue any shares of Series D Preferred Stock
that may be acquired by the Company by reason of redemption, purchase, or
otherwise.
SERIES E PREFERRED STOCK.
To secure certain payments to be made by the Company pursuant to an
employment termination agreement among the Company, Michael Viner and Deborah
Raffin, the Company issued into escrow (the "Escrow") 1,500 shares of Series E
Preferred Stock. The Series E Preferred Stock will be held in the Escrow and
will not be released to Michael Viner or Deborah Raffin except in the event of a
default in such payments by the Company.
The holders of Series E Preferred Stock cannot vote on any matters
submitted to the shareholders of the Company, except as required by applicable
law.
The Series E Preferred Stock bears a preference upon dissolution or
liquidation of the Company in an amount equal to $1,000 per share of Series E
Preferred Stock (the "Series E Stated Value"). The Series E Preferred Stock is
junior to the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock and the Series D Preferred Stock with respect to liquidation
and dividends. The Series E Preferred Stock is redeemable at the option of the
Company, 30 days after the expiration of the Escrow, at a redemption price equal
to 80% of the Series E Stated Value. Except for payment of the Stated Value upon
liquidation of the Company and as otherwise permitted by law, the holders of
Series E Preferred Stock are not entitled to receive any dividends.
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<PAGE> 33
The Series E Preferred Stock is convertible at the option of the holder,
at any time after release thereof from the Escrow, into such number of shares of
Common Stock calculated by dividing $1,000 by the then applicable Conversion
Price. The Conversion Price is the average of the closing prices for the five
consecutive days upon the principal trading market for the Common Stock prior to
the date such shares are released from the Escrow.
So long as shares of Series E Preferred Stock are outstanding, the
Company may not, without the approval of at least a majority of the then
outstanding shares of Series E Preferred Stock voting as a class, (i) alter or
change the rights, preferences or privileges of the shares of Series E Preferred
Stock so as to affect adversely such shares, (ii) amend its Articles of
Incorporation so as to affect adversely the shares of Series E Preferred Stock
(except that the Company may authorize or increase the number of authorized
shares of Common Stock), or (iii) increase the authorized number of shares of
Series E Preferred Stock.
WARRANTS; OPTIONS
In March 1997, the Company issued (i) warrants to purchase 666,666
shares of Common Stock at $2.00 per share, (ii) warrants to purchase 666,667
shares of Common Stock at $2.50 per share and (iii) warrants to purchase 666,667
shares of Common Stock at $3.00 per share. Such exercise prices are subject to
anti-dilution adjustments. The holders of such warrants are not entitled to any
rights of a shareholder in the Company. The aggregate amount the Company
received for the sale of such warrants (and 3,000 shares of Series B Preferred
Stock and 920 shares of Series C Preferred Stock) was $3,920,000 (including a
contribution of $676,000 payable by the Company to certain of the purchasers).
On May 15, 1997, the Company issued (a) warrants to purchase 125,000
shares of Common Stock, (b) warrants to purchase 75,000 shares of Common Stock
and (c) warrants to purchase 50,000 shares of Common Stock. One-third of each
such warrants are exercisable until March 27, 2000 at an exercise price of $2.00
per share, one-third are exercisable until March 27, 2000 at an exercise price
of $2.50 per share and the final one-third are exercisable until March 27, 2001
at an exercise price of $3.00 per share. Such exercise prices are subject to
anti-dilution adjustments. The holders of such warrants are not entitled to any
rights of a shareholder in the Company. The aggregate amount the Company
received for the sale of such warrants (and 250 shares of Series B Preferred
Stock and 250 shares of Series C Preferred Stock) was $500,000.
On June 3, 1997, the Company issued (a) warrants to purchase 375,000
shares of Common Stock, (b) warrants to purchase 250,000 shares of Common Stock
and (c) warrants to purchase 125,000 shares of Common Stock. One-third of each
such warrants are exercisable until March 27, 2000 at an exercise price of $2.00
per share, one-third are exercisable until March 27, 2000 at an exercise price
of $2.50 per share and the final one-third are exercisable until March 27, 2001
at an exercise price of $3.00 per share. Such exercise prices are subject to
anti-
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<PAGE> 34
dilution adjustments. The holders of such warrants are not entitled to any
rights of a shareholder in the Company. The aggregate amount the Company
received for the sale of such warrants (and 750 shares of Series B Preferred
Stock and 750 shares of Series C Preferred Stock) was $1,500,000 (including
$175,000 in the form of forgiveness of certain indebtedness owed by the Company
to certain of the purchasers).
In March 1997, the Company retired $500,000 of a loan from Morgan Fuller
Capital Group, LLC ("Morgan Fuller") in exchange for 210,526 shares of Common
Stock and warrants to purchase 35,088 shares of Common Stock at $2.50 per share,
warrants to purchase 35,088 shares of Common Stock at $3.50 per share and
warrants to purchase 35,087 shares of Common Stock at $4.50 per share. Such
shares and warrants were subsequently sold by Morgan Fuller to individual
investors in a private placement.
In October 1996, the Company entered into a financial advisory agreement
with Morgan Fuller. As compensation for services thereunder the Company granted
to Morgan Fuller warrants to purchase for a period of three years from the date
thereof, up to 180,000 shares of Common Stock at an exercise price of $2.75 per
share.
The shares of Common Stock issuable upon exercise of the warrants
described above are being registered pursuant to the registration statement of
which this Prospectus is a part. In addition to such warrants, the Company has
issued other warrants as described below. The shares of Common Stock issuable
upon exercise of the warrants described below are not being registered pursuant
to the registration statement of which this Prospectus is a part.
On September 2, 1994 the Company consummated the sale of 300,000 Units
(the "1994 Units") at a price of $4.00 per Unit in a private placement (the
"1994 Private Placement"). Each Unit consists of one share of Common Stock and
one Redeemable Warrant (the "1994 Redeemable Warrants"). The shares of Common
Stock comprising the 1994 Units and the shares of Common Stock issuable upon
exercise of the 1994 Redeemable Warrants were registered for resale under the
Registration Statement relating to the Company's initial public offering. The
following description of the 1994 Redeemable Warrants summarizes the detailed
provisions of the 1994 Redeemable Warrants and the related Placement Agency
Agreement. Such statements do not purport to be complete and are qualified in
their entirety by reference to the 1994 Redeemable Warrants and the related
Placement Agency Agreement which are filed as exhibits to the Registration
Statement.
Each two 1994 Redeemable Warrants entitle the holder thereof to purchase
one share of Common Stock at a price of $8.00 per share (subject to adjustment
under certain circumstances) for a period of four years commencing on the 1994
Private Placement closing date. The 1994 Redeemable Warrants are redeemable by
the Company at a price of five cents ($.05) per share underlying the 1994
Redeemable Warrants at any time after six months from the closing date, provided
the Common Stock has traded on a nationally recognized stock exchange or on
NASDAQ at a per share closing price of $11.00 per share of more (subject to
35
<PAGE> 35
adjustment under certain circumstances) for twenty (20) consecutive trading
days, and provided further that the 1994 Redeemable Warrants may only be
redeemed by the Company at such time as a majority of the holders thereof have
(or are granted) the right to demand registration of the Common Stock underlying
the 1994 Redeemable Warrants under the Securities Act or to sell such Common
Stock pursuant to Rule 144 promulgated under the Securities Act. The 1994
Redeemable Warrants do not confer upon the holder any voting or any other rights
of a shareholder of the Company. Pursuant to the related Placement Agency
Agreement, the Company has agreed and, pursuant to the several subscription
agreements between the purchasers and the Company, each of the purchasers of the
1994 Units has agreed, that the shares underlying the 1994 Redeemable Warrants
may be sold only through the underwriter, Joseph Stevens & Co.
The exercise price of the 1994 Redeemable Warrants and the number and
kind of shares of Common Stock or other securities and property to be obtained
upon exercise of the 1994 Redeemable Warrants are subject to adjustment in
certain circumstances including a stock split, or stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock. Additionally,
an adjustment would be made upon the sale of all or substantially all of the
assets of the Company so as to enable holders of 1994 Redeemable Warrants to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable in such event by a holder of the number of shares of
Common Stock that might otherwise have been purchased upon exercise of such 1994
Redeemable Warrant. No adjustment for previously paid cash dividends, if any,
will be made upon exercise of the 1994 Redeemable Warrants.
In the event that the Company should merge with another company, become
a party to a consolidation or transfer all or substantially all of its assets to
another company, each 1994 Redeemable Warrant then outstanding would, without
the consent of any holder, become exercisable exclusively for the kind and
amount of securities, cash and other property receivable upon the merger,
consolidation or transfer by a holder of the number of shares of Common Stock
into which such Unit might have been converted immediately prior to such merger,
consolidation or transfer.
From November 1995 through January 1996, the Company sold 76 Units (the
"1995/1996 Private Placement") each unit consisting of (i) 12,500 shares of
Common Stock and (ii) 12,500 Common Stock Purchase Warrants (the "1995/1996
Warrants"). Each 1995/1996 Warrant is exercisable to purchase one share of
Common Stock at an exercise price of $12.00 per share, commencing nine months
following the closing of the 1995/1996 Private Placement (or earlier upon the
mutual consent of the Company and the Placement Agent) and expires at the close
of business on the last day of the sixtieth month following the closing of the
1995/1996 Private Placement. The exercise price and number of shares of Common
Stock or other securities issuable on exercise of the 1995/1996 Warrants are
subject to adjustment in certain circumstances, including in the event of a
stock dividend, recapitalization, or certain mergers or consolidations of the
Company. However, the 1995/1996 Warrants are not
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<PAGE> 36
subject to adjustment for issuances of Common Stock at prices below the exercise
price of the 1995/1996 Warrants. Reference is made to the terms of the 1995/1996
Warrant for a complete description of the terms and conditions therein (the
description contained herein being qualified in its entirety by reference
thereto).
The 1995/1996 Warrants are redeemable by the Company, upon the Placement
Agent's consent, at any time commencing nine months after the closing of the
1995/1996 Private Placement upon notice of not less than 30 days, at a price of
$.10 per 1995/1996 Warrant; provided, that the closing bid quotation of the
Common Stock on all 20 trading days ending on the third day prior to the day on
which the Company gives notice has been at least 150% of the then effective
exercise price of the 1995/1996 Warrants. The holders of the 1995/1996 Warrants
shall have the right to exercise their Warrants until the close of business on
the date fixed for redemption.
No fractional shares will be issued upon exercise of the 1995/1996
Warrants. In lieu thereof, the shares of Common Stock will be rounded down to
the nearest whole share.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent for the Common Stock is U.S. Stock Transfer
Corporation, Glendale, California.
SHARES ELIGIBLE FOR FUTURE SALE
Substantially all of the 1,205,578 shares of Common Stock outstanding,
and subject to issuance, the 7,103,263 shares of Common Stock issuable upon
exercise of outstanding options or warrants or issuable upon conversion of
outstanding convertible securities will be freely tradeable in the public
markets, in certain cases pursuant to a registration statement or available
exemption from registration.
No prediction is made as to the effect, if any, that sales of shares
of Common Stock or even the availability of such shares for sale will have on
the market prices prevailing from time to time. The possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
the prevailing market price for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
EXPERTS
The consolidated financial statements of Dove Entertainment, Inc. as of
December 31, 1996 and for the years ended December 31, 1996 and 1995 have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The Company engaged KPMG Peat Marwick LLP as its principal accountants
as of September 18, 1995.
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<PAGE> 37
RECENT DEVELOPMENTS
In November, 1997, the Company entered into a Credit, Security, Guaranty
and Pledge Agreement with The Chase Manhattan Bank (the "Credit Agreement"). The
Credit Agreement provides for a revolving line of credit not to exceed
$8,000,000. The amount the Company is permitted to borrow under the Credit
Agreement is based on a borrowing base (calculated on the value of certain of
the Company's assets), which can not exceed $6,000,000, and amounts that are
guaranteed by MEI, which can not exceed $2,000,000 and can not be borrowed
without the consent of MEI. The Company's obligations under the Credit Agreement
are secured by substantially all of the Company's assets (other than the
Company's real estate) and are guaranteed by Dove Television and Dove
International. The stated termination date of the Credit Agreement is November
4, 2000. Interest on loans under the Credit Agreement is based on the prime rate
(or CD rate or federal funds effective rate) plus 2% or the London Interbank
Market rate for Eurodollar loans plus 3%. The Credit Agreement contains various
covenants with which the Company is required to adhere, including limitations on
indebtedness, limitations on liens, limitations on guarantees, limitations on
investments, limitations on consolidations, mergers and sales and purchases of
assets, limitations on capital expenditures, limitations on transactions with
affiliates and minimum capital base, EBIT ratio and liquidity ratio
requirements. The proceeds from the initial borrowings under the Credit
Agreement were used to repay the $1,365,000 term loan from Sanwa Bank California
and the $550,000 working capital loan from MEI.
In November, 1997, the Company entered into a Physical Distribution and
Data Processing Agreement (the "Distribution Agreement") with Mercedes
Distribution Center ("Mercedes"), pursuant to which Mercedes will receive,
store, pack and ship the Company's product and render other services in
connection with the distribution of the Company's audio and book products to its
customers. Such agreement replaces the existing agreement with the Company's
primary audio book and printed book distributor, who previously notified the
Company of discontinuance of distribution as of December 31, 1997. The
Distribution Agreement has a term of five years.
38
<PAGE> 38
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER TO SELL OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
TABLE OF CONTENTS
PAGE
Available Information 2
Incorporation of Certain Documents by Reference 3
The Company 4
Risk Factors 5
Use of Proceeds 19
Selling Shareholders 19
Plan of Distribution 22
Description of Securities 24
Experts 33
Recent Developments 34
39
<PAGE> 39
DOVE ENTERTAINMENT, INC.
8,308,841 SHARES
COMMON STOCK
PROSPECTUS
JANUARY __, 1998
40
<PAGE> 40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION
The following table sets forth costs and expenses payable in connection
with the sale and distribution of the securities being registered. All amounts
are estimates except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee $ 3,294
Legal fees and expenses $ 2,500
Accounting fees and expenses $ 5,000
Transfer agent and registrar fees $ 5,000
Miscellaneous $ 5,000
Total $20,794
</TABLE>
None of the expenses of issuance and distribution of the Shares is to be
borne by the Selling Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Companies by-laws, as amended provide that the Company will
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of the Company to
procure a judgment in its favor) by reason of the fact that such person is or
was an agent of the Company, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner he or she
reasonably believed to be in the best interest of the Company, and, in the case
of a criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. In addition, the Company will indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action by or in the right of the Company to procure a judgment in its
favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actionably and reasonably incurred by such person
in connection with the defense of settlement of such action if such person acted
in good faith and in a manner he or she believed to be in the best interest of
the corporation and its shareholders, except that no such indemnification will
be made (a) in respect of any claim, issue or matter as to which such persons
will have been adjudged to be liable to the Company in the performance of such
person's duty to the Company and its shareholders, unless, an only to the extent
that, the court in which such proceeding is or was pending determines that, in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for expenses, (b) of amounts paid in settling
or otherwise disposing of a pending action without court approval, or (c) of
expenses incurred in defending a pending action which is settled or otherwise
disposed of without court approval. For these purposes, "Agent" means any person
who is or was a director, officer, employee or other agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee
41
<PAGE> 41
or agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was serving as a director, officer, employee or
agent of a foreign or domestic corporation which was a predecessor corporation
of the Company or of another enterprise at the request of such predecessor
corporation. "Proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative.
The rights to indemnification provided by the Bylaws are not exclusive
of any other right which any person may have or acquire under a statute, bylaw,
agreement, vote of shareholders or of disinterested directors or otherwise.
Except to the extent set forth above, there is no article, provision,
bylaw, contract, arrangement or statute under which any director or officer of
the Company is insured or indemnified in any manner against any liability which
may be incurred in such capacity.
42
<PAGE> 42
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger by and among the Company, Dove Four Point,
Inc., Four Point Entertainment, Inc. and holders of capital stock of
Four Point Entertainment, Inc., dated as of April 12, 1996 (filed as
Exhibit 2.1 to the Company's Quarterly Report on Form 10-QSB filed with
the Commission on May 14, 1996 (the "March 1996 Form 10-QSB"))
4.1 Specimen common stock certificate of the Company (filed as Exhibit 4.1
to Amendment No. 2 to the IPO Registration Statement ("Amendment No.
2") filed with the Commission on November 29, 1994)
4.2 Stock Purchase Agreement dated as of March 27, 1997 among the Company,
Media Equities International, LLC, Michael Viner and Deborah Raffin
Viner (filed as Exhibit 10.40 to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996)
4.3 Form of Subscription, Representation and Securities Transfer
Restriction Agreement
23.1 Consent of KPMG Peat Marwick LLP
24 Power of Attorney contained on page II-4 hereto
</TABLE>
43
<PAGE> 43
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
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 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 the 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.
(b) The undersigned Registrant hereby undertakes that:
Insofar as indemnification for 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 the 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.
44
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, in the City of Los
Angeles, State of California, December 31, 1997.
DOVE ENTERTAINMENT, INC.
By /s/ RONALD LIGHTSTONE
-------------------------------
Ronald Lightstone, President
and Chief Executive Officer
45
<PAGE> 45
POWER OF ATTORNEY
The Company and each person whose signature appears below constitutes
and appoints Ronald Lightstone, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him or her and in
his or her name, place and stead, in any and all capacities, to sign and file
(i) any and all amendments (including post-effective amendments) to this
Registration Statement, with all exhibits thereto, and all other documents in
connection therewith, and (ii) any registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or necessary
to be done, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
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 date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ RONALD LIGHTSTONE
Ronald Lightstone President, Chief Executive Officer December 31, 1997
and Director
/s/ NEIL TOPHAM
Neil Topham Chief Financial Officer (principal December 31, 1997
accounting officer)
/s/ TERRENCE ELKES
Terrence Elkes Director December 31, 1997
/s/ KEN GORMAN
Ken Gorman Director December 31, 1997
/s/JACK HEALY
Jack Healy Director December 31, 1997
/s/ BRUCE MAGGIN
Bruce Maggin Director December 31, 1997
/s/ STEVE MAYER
Steve Mayer Director December 31, 1997
Lee Masters Director
</TABLE>
46
<PAGE> 46
<TABLE>
<S> <C> <C>
</TABLE>
47
<PAGE> 47
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DOVE ENTERTAINMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
48
<PAGE> 1
EXHIBIT 4.3
DOVE ENTERTAINMENT, INC.
Reg-D Private Placement Financing
SUBSCRIPTION, REPRESENTATION AND
SECURITIES TRANSFER RESTRICTION AGREEMENT
DATED MARCH 26, 1997
TO BE USED ONLY IN CONJUNCTION WITH
AN INVESTMENT IN SHARES DESCRIBED HEREIN
INSTRUCTIONS TO SUBSCRIBERS
---------------------------
If you wish to subscribe for the Reg-D Private Placement consisting of
(i) shares of common stock, par value $.01 per share (the "Common Stock") of
DOVE ENTERTAINMENT, INC., a California corporation (the "Company"), and (ii)
warrants to purchase Common Stock (the "Warrants"), please complete and sign the
Subscription, Representation and Securities Transfer Restriction Agreement (the
"Agreement") marked "Execution Copy," following the instructions carefully. If
you have any questions concerning any of the information called for, you should
ask your lawyer, accountant or financial advisor for assistance, and if you
desire, contact the individual indicated below.
The completed and signed Agreement, together with your wired funds in
the amount of your total subscription payable to "MILLENIUM BANK AS ESCROW AGENT
FOR DOVE ENTERTAINMENT, INC.," should then be sent to the address set forth
below. You should retain a copy of the executed Agreement for your files.
ANSWER ALL QUESTIONS.
ALL INFORMATION WILL BE TREATED CONFIDENTIALLY.
MILLENIUM BANK AS ESCROW AGENT FOR DOVE ENTERTAINMENT, INC.
180 Sansome Street
San Francisco, CA 94119
Routing Number: 1210-4136-2
Account No.: 01000-21088
MORGAN FULLER CAPITAL GROUP, LLC
595 Market Street, Suite 2100
San Francisco, CA 94105
Phone: (415) 977-1500
Attn: Susan Martin
Operations Officer
NEITHER THE COMMON STOCK, THE WARRANTS, NOR THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
<PAGE> 2
AMENDED, OR QUALIFIED UNDER THE CALIFORNIA CORPORATE
SECURITIES LAW OF 1968, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY OTHER
JURISDICTION, AND MAY ONLY BE SOLD, ASSIGNED, PLEDGED,
DISTRIBUTED, DONATED OR OTHERWISE TRANSFERRED OR DISPOSED OF
BY AN INVESTOR IF SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, UNLESS THE
COMPANY DETERMINES THAT EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS ARE AVAILABLE.
SUBSCRIPTION, REPRESENTATION AND
SECURITIES TRANSFER RESTRICTION
AGREEMENT
DOVE ENTERTAINMENT, INC.
8955 Beverly Boulevard
Los Angeles, CA 90048
GENTLEMEN:
1. Subscription of Common Stock and Warrants. By executing and delivering
this Subscription, Representation and Stock Transfer Restriction
Agreement (the "Agreement"), the undersigned (and each of the
undersigned if more than one) hereby subscribes to purchase, on the
terms and conditions described herein, (i) _____________ shares of
common stock, par value $.01 per share (the "Common Stock") of DOVE
ENTERTAINMENT, INC., a California corporation (the "Company"), and (ii)
warrants to purchase Common Stock (the "Warrants") pursuant to the
terms of the Warrant Certificate attached hereto as Exhibit A, for an
aggregate purchase price of $_____________.
2. Acknowledgments. The undersigned (and each of the undersigned if more
than one) acknowledges that:
2.1 This subscription may be rejected in whole or in part at the
sole discretion of the Company, and the execution and delivery
of this Agreement by the undersigned investor or investors do
not constitute an agreement to sell the Common Stock or
Warrants or any other securities to such investor(s) unless
and until this Agreement has been accepted in writing by the
Company. This Agreement, however, is irrevocable as to the
undersigned once executed by the undersigned and delivered to
the Company.
2.2 The Company will rely upon the information contained herein
for purposes of determining my suitability as an investor in
the Company.
2
<PAGE> 3
2.3 The management of the Company is vested in the Board of
Directors and that being a shareholder confers no right to
participate in the Company's business or in the decisions of
its directors and officers.
3. Representations. The undersigned (and each of the undersigned if more
than one) hereby makes the following representations and warranties to
the Company:
3.1 I have received and carefully reviewed this Agreement, and I
have separately received and carefully reviewed the Company's
Private Placement Investment Information and Background
Material, which includes the information, including
Supplemental Disclosure, set forth in Schedule A attached
hereto and incorporated herein by this reference
(collectively, the "Investment Information").
3.2 I have obtained from the Company satisfactory responses to all
questions and requests for further information regarding the
business and plans of the Company, the contents of the
Investment Information, the terms and conditions of the
Offering and all other relevant matters.
3.3 I have been given access to and the opportunity to obtain such
additional information as I have deemed necessary to verify
the accuracy of the information provided to me by the Company.
3.4 I have not received and am not relying upon any written
offering literature or prospectus other than this Agreement
and the materials contained in the Investment Information, and
have not received and am not relying upon any oral or any
other written, representations, warranties, information or
statements whatsoever.
3.5 I personally have substantial knowledge and experience in
financial and business matters, have specific experience
making investment decisions of a similar nature, and am
capable, without the use of a financial or other advisor, of
utilizing and analyzing the information made available in
connection with this offering and of evaluating the merits and
risks of an investment in Securities. I will provide the
Company, upon request, with such information concerning my
prior investment experience, business or professional
experience and other information as the Company may deem
necessary to further evaluate the foregoing representations.
In addition, I have available to me and, when I desire or deem
appropriate, have utilized such financial or other advisors to
further supplement my own knowledge and experience.
3.6 I am subscribing to acquire the shares of Common Stock and
Warrants for investment purposes only, for my own account, and
not for resale to others or in connection with (or with any
view to) any further distribution of such security.
3
<PAGE> 4
3.7 I understand that (a) the shares of Common Stock, the Warrants
and the shares of Common Stock issuable upon Conversion of the
Warrants, have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or qualified under
the California Corporate Securities Law of 1968, as amended,
or the securities or blue sky laws of any other jurisdiction,
(b) the shares of Common Stock, the Warrants and the shares of
Common Stock issuable upon Conversion of the Warrants, cannot
be resold unless they subsequently are registered under the
Securities Act and qualified under applicable state securities
or blue sky laws, unless the Company determines that
exemptions from such registration and qualification
requirements are available and (c) consequently, subscribers
must bear the economic risk of an investment in the shares of
Common Stock, the Warrants and the shares of Common Stock
issuable upon Conversion of the Warrants, for an indefinite
period of time. I understand that only a very limited public
market now exists for the Company's Common Stock and it is
uncertain whether a substantial public market will ever exist
for the Common Stock.
3.8 I am aware that an investment in the securities offered hereby
is speculative and involves a high degree of risk.
3.9 I have adequate means of providing for my current needs and
possible personal contingencies and have no need for liquidity
in an investment in the shares of Common Stock or Warrants. I
am able to bear the economic risk of an investment in such
securities, can afford to hold them for an indefinite period
of time and, at the present time, could afford a complete loss
of such investment.
3.10 I may be deemed to be an accredited investor, because I meet
the requirements of one or more of the following categories:
(Please initial all boxes which apply to you.)
[ ] I am a director or executive officer of the Company.
[ ] I am a natural person whose individual net worth, or joint
net worth with my spouse, exceeds $1,000,000.
[ ] I am a natural person and had individual (not joint)
income in excess of $200,000 in each of the two most
recent years and reasonably expect to reach the same
income level in the current year, or I am a natural person
and had joint income (together with my spouse) in excess
of $300,000 in each of the two most recent years and
reasonably expect to reach the same income level in the
current year.
[ ] The undersigned is a private business investment company
as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940.
4
<PAGE> 5
[ ] The undersigned is a corporation, trust, Massachusetts
or similar business trust, partnership or other
organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (i.e., tax
exempt entities), not formed for the specific purpose of
acquiring the Shares, with total assets in excess of $5
million according to its most recent audited financial
statements, and the investment decisions of which are
directed by one or more persons who have substantial
knowledge and experience in financial and business
matters, have specific experience making investment
decisions of a similar nature, and are capable, without
the use of a financial or other advisor, of utilizing and
analyzing the information made available in connection
with this offering and of evaluating the merits and risks
of an investment in the Securities.
[ ] The undersigned is (a) a small business investment
company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business
Investment Company Act of 1958; (b) any investment company
registered under the Investment Company Act of 1940 or a
business development company as defined in Section
2(a)(48) of that Act; or (c) a U.S. bank or savings and
loan association, whether acting for itself or as a
trustee, or an insurance company as defined in Section
(2)(13) of the Act.
[ ] The undersigned is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income
Security Act of 1974, the investment decisions of which
are made by a plan fiduciary, as defined in Section 3(21)
of such Act, which is either a bank, a savings and loan
association, an insurance company, or a registered
investment advisor.
[ ] The undersigned is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income
Security Act of 1974, which either has total assets in
excess of $5,000,000 or is a self-directed plan, the
investment decisions of which are made solely by one or
more persons able to make the representations contained in
section 3.5 above and who fits into one of the above
categories.
[ ] The undersigned is an entity in which all of the equity
owners are accredited investors, falling into one or more
of the categories described above.
NOTE: The Company will not sell shares of Common Stock to an
investor unless the investor falls within one or more of the
above categories.
3.11 All information which I have provided to the Company
concerning myself, my financial position and my knowledge of
and experience with financial and business matters is correct
and complete as of the date set forth at the end of this
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Agreement, and if there should be any material change in such
information prior to the Final Closing of this Offering, I
will immediately provide the Company with such information.
3.12 If an individual, the undersigned is at least 21 years of age.
If an entity other than an individual, the undersigned is duly
authorized to purchase and hold the securities offered hereby.
3.13 If an individual, the residence, or, if an entity other than
an individual, the principal place of business, of the
undersigned, is as set forth on the signature page of this
Agreement. This address is the true and correct address of the
undersigned and is the only jurisdiction in which an offer to
sell the shares of Common Stock was made to the undersigned.
The undersigned has no present intention, if an individual, of
becoming a resident of, or, if an entity other than an
individual, of moving its principal place of business to, any
other state or jurisdiction.
4. Restrictions on Transfer of Securities. The undersigned (and each of
the undersigned if more than one) hereby makes the following further
agreements, representations and warranties regarding the restrictions
on the transferability of the Securities:
4.1 I agree that I will not directly or indirectly sell, assign,
pledge, distribute, donate, or otherwise transfer or dispose
of, or offer or agree to do any of the foregoing with respect
to, any of the shares of Common Stock or shares of Common
Stock received upon exercise of the Warrant (the "Conversion
Shares"), or any beneficial interest in the shares of Common
Stock or Conversion Shares, unless either (a) the shares of
Common Stock or Conversion Shares, as applicable, are
registered under and sold in accordance with the Securities
Act and the rules and regulations promulgated thereunder, and
are registered or qualified under and sold in accordance with
the provisions of any applicable state securities or blue sky
laws or (b) the Company has determined that exemptions from
such registration and qualification requirements are
available.
4.2 I understand and agree that a legend will be stamped on each
certificate representing the Common Stock or Conversion
Shares, as applicable, substantially in the following form:
The Securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or qualified under
the California Corporate Securities Law of 1968, as
amended, or the securities or blue sky laws of any
other jurisdiction. The Securities represented hereby
cannot be sold, assigned, pledged, distributed,
donated or otherwise transferred or disposed of
without such registration under the Securities Act
and registration or qualification under applicable
state securities or blue sky laws, unless the Company
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determines that exemptions from such registration and
qualification requirements are available.
4.3 I understand and agree that the Company may issue such stop
transfer instructions to its transfer agents, if any, as it
may deem necessary to enforce the above transfer restrictions.
5. Joint Signers: Successors and Assigns. If this Agreement is signed by
more than one person or entity, then the obligations of the undersigned
under this Agreement shall be joint and several, and the
acknowledgments, representations, warranties and agreements herein
contained shall be deemed to be made by and be binding upon each such
person or entity. This Agreement shall survive the death or disability
of the undersigned and shall be binding upon the undersigned's heirs,
executors, administrators, successors and permitted assigns.
6. Miscellaneous.
6.1 This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable
to contracts between California residents entered into and to
be performed entirely within the State of California without
giving effect to any principle of conflict of law.
6.2 Except as otherwise provided herein, the provisions hereof
shall insure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto.
6.3 This Agreement constitutes the full and entire understanding
and agreement between the parties with regard to the subjects
hereof and supersedes all prior agreements, understandings and
arrangements, whether oral or written.
6.4 This Agreement may be executed in counterparts, each of which
shall be enforceable against the parties actually executing
such counterparts, and all of which together shall constitute
one instrument.
6.5 In the case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
6.6 This Agreement may not be modified without the written consent
of the Company. No waiver of any provision shall be deemed a
waiver of any other provision or any subsequent application of
the provision so waived.
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7. CERTIFICATION AS TO TAXPAYER IDENTIFICATION NUMBER AND BACKUP
WITHHOLDING AND NON-FOREIGN STATUS-SUBSTITUTE FORM W-9 SOCIAL SECURITY
OR TAX ID NUMBER.
UNDER PENALTY OF PERJURY, I CERTIFY BY MY SIGNATURE BELOW THAT (a) THE
NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER, (b) I AM
NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE (I) I AM EXEMPT FROM BACKUP
WITHHOLDING, (II) I HAVE NOT BEEN NOTIFIED THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR
(III) THE INTERNAL REVENUE SERVICE HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT
TO BACK WITHHOLDING, (c) I AM NOT A NON-RESIDENT ALIEN FOR PURPOSES OF U.S.
INCOME TAXATION, (d) MY HOME ADDRESS (INDIVIDUAL) OR BUSINESS ADDRESS (ENTITY)
SET FORTH IN THE AGREEMENT IS CORRECT AND (e) IF I BECOME A NON-RESIDENT ALIEN,
I WILL NOTIFY THE COMPANY WITHIN SIXTY (60) DAYS OF DOING SO.
IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE PRESENTLY SUBJECT TO BACKUP
WITHHOLDING, STRIKE OUT THE LANGUAGE UNDER (b) ABOVE BEFORE SIGNING.
8. Type of Ownership for the Common Stock subscribed for (Check the
Appropriate Box):
[ ] INDIVIDUAL OWNERSHIP BY UNMARRIED PERSON
[ ] OWNERSHIP BY MARRIED PERSON AS SOLE AND SEPARATE PROPERTY (if you
live in a state which has community property laws, signatures of
both spouses may be required)
[ ] COMMUNITY PROPERTY (signatures of both spouses are required)
[ ] JOINT TENANTS WITH RIGHT OF SURVIVORSHIP (both parties must sign)
[ ] TENANTS-IN-COMMON (both parties must sign)
[ ] CORPORATION
[ ] PARTNERSHIP
[ ] TRUST
[ ] OTHER ENTITY
Any person executing this Agreement on behalf of such entities hereby
represents and agrees that: (a) he or she is duly authorized to act on
behalf of such corporation, partnership, trust or other entity, (b)
such corporation, partnership, trust or other entity was formed on
_____________, 19__ and (c) he or she will provide such information as
the Company may request confirming the authority to sign on behalf of
such entity.
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9. Subscription Details and Execution. IN WITNESS WHEREOF, the undersigned
hereby subscribe(s) for the amount of Common Stock and Warrants at the
subscription price as indicated below, provide(s) the information
indicated, and execute(s) and deliver(s) this Agreement as of the date
indicated. Upon close of escrow in accordance with the joint escrow
instructions, the Escrow Agent will mail to you at the address
indicated below original certificates representing the purchased shares
of Common Stock and the Warrant.
[remainder of page intentionally left blank,
signature page to follow]
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Subscription Price Enclosed: $______; make wired funds payable to
"______________ AS ESCROW AGENT FOR DOVE ENTERTAINMENT, INC.")
Date of Execution: ______________, 1997
- ---------------------------------- ----------------------------------
Investor #1 (Print or Type Name) Investor #2 (Print or Type Name)
- ---------------------------------- ----------------------------------
Signature Signature
- ---------------------------------- ----------------------------------
Social Security or Tax ID # Social Security or Tax ID #
- ---------------------------------- ----------------------------------
Residence Street Address Residence Street Address
- ---------------------------------- ----------------------------------
City and State Zip City and State Zip
- ---------------------------------- ----------------------------------
Residence Telephone Residence Telephone
- ---------------------------------- ----------------------------------
Business Name Business Name
- ---------------------------------- ----------------------------------
Business Address Business Address
- ---------------------------------- ----------------------------------
City and State Zip City and State Zip
- ---------------------------------- ----------------------------------
Business Telephone Business Telephone
- ---------------------------------- ----------------------------------
Mail Correspondence to: Mail Correspondence to:
[ ] Residence [ ] Business [ ] Residence [ ] Business
SUBSCRIPTION ACCEPTED:
DOVE ENTERTAINMENT, INC.
By: Date: , 1997
------------------------------- ---------------------
Michael Viner
Chairman and Chief Executive Officer
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SCHEDULE A
Public Disclosure Documents
1. Form 10-KSB for the Fiscal Year Ended December 31, 1995, as amended by
Form 10- KSB filed with the Securities and Exchange Commission (the
"SEC") on September 12, 1996.
2. Form 10-QSB for the Quarter Ended March 31, 1996, as amended by Form
10-QSB/A filed with the SEC on September 10, 1996.
3. Form 10-QSB for the Quarter Ended June 30, 1996, as amended by Form
10-QSB/A filed with the SEC on September 11, 1996.
4. Form 10-QSB for the Quarter Ended September 30, 1996.
5. Rule 424(b) Prospectus filed with the SEC on September 20, 1996.
6. Proxy Statement, dated October 11, 1996.
Supplemental Disclosure
The Company believes, based upon its current operations and
obligations, that the net proceeds from the proposed sale and issuance of Common
Stock will not be adequate, together with the Company's existing working
capital, to pay all of the Company's existing obligations, many of which are
past due. Accordingly, the Company is currently seeking to raise additional
funds by, among other means, additional equity financings, a new bank facility
and/or entering into an agreement with a strategic partner to make an investment
in the Company. While there can be no assurance that such efforts by the Company
to raise additional funds or to find a strategic partner will be successful, the
Company is currently in discussions with several intermediaries concerning
potential financings, various banks and at least two potential strategic
partners. While there can be no assurance as to the occurrence of any of the
following, such potential strategic partner may (a) agree to make an investment
in the Company in the form of the purchase of (i) Common Stock and warrants,
(ii) a security (possibly debt or preferred stock) convertible into Common Stock
or (iii) other securities (including debt) of the Company, (b) seek
representation on the Board of Directors of the Company through one or more
seats thereon, (c) seek to bring new senior management personnel to the Company
and/or (d) attempt to assist the Company in obtaining a new bank facility. If
the Company is unable to obtain additional financing by the end of March 1997,
the Company very likely would be subject to receiving a "going concern opinion"
from its independent public accountants when such independent public accountants
issue their audit report for the Company due at such time. See MD&A -- Liquidity
and Capital Resources.
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EXHIBIT 23.1
The Board of Directors
Dove Entertainment, Inc.:
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Los Angeles, California
December 31, 1997
