<PAGE>
As filed with the Securities and Exchange Commission on July 15, 1998
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________
THE L. L. KNICKERBOCKER CO., INC.
(Exact name of registrant as specified in its charter)
California 33-0230641
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
25800 Commercentre Drive
Lake Forest, California 92630
(949) 595-7900
(Address and telephone number of Registrant's principal executive offices
and principal place of business)
----------------------------------------------
Gerald A. Margolis, Esq.
9595 Wilshire Boulevard, Suite 900
Beverly Hills, California 90212
(310) 550-0555
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public............
From time to time following the effective date of this Registration Statement
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 interest
reinvestment plans, please 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering [_] _____________
If this Form is a post effective amendment filed pursuant to Rule 462(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>
=====================================================================================================
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered Share (1) price (1)
<S> <C> <C> <C> <C>
Common Stock (2) 3,720,000 (4) $2.75 $10,230,000 $3,017.85
Common Stock (3) 525,000 (4) $2.75 $ 1,443,750 $ 425.91
Total registration fee $3,443.76
=====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low bid prices
of the Registrant's common stock as reported by the Nasdaq Stock Market on
July 10, 1998.
(2) Shares issuable upon conversion of 6% Convertible Debentures.
(3) Shares issuable upon exercise of Stock Purchase Warrants.
(4) Pursuant to Rule 416 of the Securities Act, there are also being registered
such presently indeterminable number of additional shares of Common Stock
as may be issued with respect to the Convertible Debentures and the Stock
Purchase Warrants as a result of stock splits, stock dividends and anti-
dilution provisions (including by reason of changes in the conversion price
of the Convertible Debentures in accordance with the terms thereof).
<PAGE>
Prospectus
Subject to completion
Dated July 15, 1998
THE L. L. KNICKERBOCKER CO., INC.
4,245,000 Shares of Common Stock
This Prospectus relates to the offer and sale by the selling stockholders
named herein (the "Selling Stockholders"), from time to time, of up to 4,245,000
shares (the "Shares") of common stock, no par value ("Common Stock"), of The L.
L. Knickerbocker Co., Inc., a California corporation (the "Company"). The
Shares are issuable by the Company upon conversion by the Selling Stockholders
of 6% convertible debentures, due October 6, 1998, in the aggregate principal
amount of $7,000,000 (the "Convertible Debentures") and upon exercise by the
Selling Stockholders of warrants to acquire shares of Common Stock (the " Stock
Purchase Warrants"). This Prospectus also covers, pursuant to Rule 416 of the
Securities Act of 1933, as amended (the "Act"), the offer and sale by the
Selling Stockholders of such presently indeterminable number of additional
shares of Common Stock issued with respect to the Convertible Debentures and the
Stock Purchase Warrants as a result of stock splits, stock dividends and anti-
dilution provisions (including by reason of changes in the conversion price of
the Convertible Debentures in accordance with the terms thereof). The shares of
Common Stock covered under the Registration Statement of which this Prospectus
is a part (the "Offered Shares") may be offered for sale from time to time by or
for the account of such Selling Stockholders in the open market, on the NASDAQ
National Market System, in privately negotiated transactions, in an underwritten
offering, or in a combination of such methods, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, or at
negotiated prices. The Offered Shares are intended to be sold through one or
more broker-dealers or directly to purchasers. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of the Offered Shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). The Selling Stockholders and any broker-dealers acting
in connection with the sale of the Offered Shares hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Act, and any
commissions received by them and any profit realized by them on the resale of
the Offered Shares as principals may be deemed underwriting compensation under
the Act. See "Selling Stockholders" and "Plan of Distribution."
The Common Stock of the Company is currently trading on the NASDAQ National
Market System under the symbol "KNIC." On July 9, 1998, the closing price per
share of the Company's Common Stock was $2.75.
The Company will not receive any of the proceeds from the sale of the
Offered Shares pursuant to this Prospectus. However, the Company will receive
proceeds from the exercise of the Stock Purchase Warrants if the Stock Purchase
Warrants are exercised. The Company has agreed to bear the expenses with
respect to the offering and sale of the Offered Shares to the public, including
the costs associated with the registration of the Offered Shares under the Act
and preparing and printing this Prospectus. Normal underwriting commissions and
broker fees, however, as well as any applicable transfer taxes, are payable
individually by the Selling Stockholders.
_______________________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK WHICH INVESTORS
SHOULD CAREFULLY CONSIDER. SEE "RISK FACTORS" BEGINNING AT PAGE 4
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES ADMINISTRATOR NOR HAS THE COMMISSION
OR ANY STATE SECURITIES ADMINISTRATOR PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________
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 sales 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 such state.
* * * * * * * * * * * * * * * * * * * * * * * * * * *
The date of this Prospectus is ________________, 1998
<PAGE>
AVAILABLE INFORMATION
The Registrant is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, NY 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661; and
copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W. Judiciary Plaza, Washington, DC 20549 at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and informational statements electronically filed with the Commission.
The address of such site is http://www.sec.gov. The Company's Common Stock is
traded on the Nasdaq National Market System. Reports, proxy statements and
other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc. at 1735 K Street N.W., Washington, DC
20006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Act with respect to the Offered Shares. This
Prospectus is part of the Registration Statement and does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and the documents incorporated herein by reference and
attached hereto. Such additional information may be obtained from the
Commission's principal office in Washington, DC.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission, and are specifically incorporated by reference into
this Prospectus:
(a) the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997,
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998,
(c) the Company's Current Report on Form 8-K filed June 9, 1998,
(d) all other reports filed by the Company pursuant to Section 13(a) or
13(d) or 15(d) of the Exchange Act after the fiscal year ended
December 31, 1997, and
(e) the description of the Company's Common Stock contained in the
registration statement filed by the Company pursuant to Section 12 of
the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by reference into 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 or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated 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.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any and all of the
documents referred to above which have been incorporated into this Prospectus by
reference (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Requests for such
copies should be directed to Mr. Anthony P. Shutts, Chief Financial Officer, The
L.L. Knickerbocker Co.,Inc., 25800 Commercentre Drive, Lake Forest, CA 92630,
telephone (949) 595-7900.
2
<PAGE>
THE COMPANY
The L. L. Knickerbocker Co., Inc., a California corporation (the "Company")
was formed in 1985 under the name International Beauty Supply, Ltd. In 1993,
the articles of incorporation were amended, changing the name of the corporation
to the Company's current name, "The L. L. Knickerbocker Co., Inc." The Company
completed an initial public offering of common stock and warrants on January 25,
1995. On August 30, 1995, the Board of Directors approved a five for one split
of the Company's common stock and the increase of the number of authorized
shares of its common stock to 100,000,000.
The Company markets a variety of branded consumer items ("Brands"),
including collectibles, costume and fine jewelry, fashion accessories, patented
consumer products and consumables. The Company strives to deliver value to the
consumer through product design and quality, together with a fair price. The
goal is to create and build each Brand to the point where the Brand can be
marketed through a variety of distribution channels.
The manufacturing of non-jewelry items is out-sourced to a variety of
manufacturers that consistently deliver high-quality products. Jewelry
operations are vertically integrated, and most of the design, stone sourcing,
advanced stone cutting, and jewelry manufacturing is performed by in-house
personnel. The Brands are marketed domestically and internationally through
diverse channels of distribution, including but not limited to, the television
shopping industry, direct response print advertisements, direct mail, catalog,
retail outlets and the Internet. Celebrity spokespersons contribute to many of
the marketing efforts. These celebrities are chosen carefully on the basis of
name recognition, communications ability and a personal commitment to
participate in the programs.
The Company's current Brands include: Marie Osmond Fine Porcelain Collector
Dolls, Annette Funicello Collectible Bears, The Knickerbocker Collectible Toy
Company, Collection of the Masters by Richard Simmons, Bob Mackie Legendary
Beauties, The Georgetown Collection, The Magic Attic Catalog, The Magic Attic
Press, Barbara Mandrell Costume Jewelry, Nolan Miller Costume Jewelry, Kenneth
Jay Lane Costume Jewelry, Pilar Crespi Costume Jewelry, Harlyn International
Fine Jewelry, Mary McFadden Fashion Accessories, Dennis Basso Fashion
Accessories , Framm Accessories, ECT Ionizer, Fit & Firm(TM) by Florence
Griffith Joyner, Life Time of Skincare Facial Steamer, and Anushka Body
Contouring Spa System.
During 1996, the Company vertically integrated and expanded its Brands and
distribution channels through (i) the acquisition of Grant King International
Co., Ltd., a jewelry design and development company; Harlyn International
Company, Ltd., a fine jewelry company with international distribution; and
S.L.S. Trading Co., Ltd., a cutting and gemstone business, all located in
Bangkok Thailand; (ii) acquisition of Krasner Group, Inc., with costume jewelry
and accessories manufacturing and marketing operations based in New York; (iii)
merger of the operations of Grant King International Co., Ltd. and S.L.S.
Trading Co., Ltd. into a Thai corporation which was acquired and renamed The
L.L. Knickerbocker (Thai) Company, Ltd.; and (iv) acquisition of approximately
82% of the outstanding stock of Georgetown Collection, Inc., a collectible doll
company with operations in Portland, Maine, and its wholly owned subsidiary,
Magic Attic Press, Inc., a book publishing company with operations in Portland,
Maine.
The Company also invests in companies whose innovative ideas have potential
to make a significant contribution to the Company's own financial success. These
investments include a 32.3% equity interest in Pure Energy Corporation, which is
developing an alternative fuel, and a 13.2% equity interest in Ontro, Inc.
(formerly Self Heating Container Corporation of California) which develops self-
heating containers for a variety of food products.
The Company's general 5 year growth plan consists of expanding the current
Brands by introducing new product categories into the existing Brands, expanding
distribution of the Brands internationally, exploring acquisition opportunities
that provide complementary Brands for current distribution channels and
additional distribution channels, and continuing to review new products and
develop new Brands. There can be no assurance, however, that any of these
products or investments will prove successful.
The mailing address, street address and telephone number for the principal
executive offices of the Company are 25800 Commercentre Drive, Lake Forest,
California 92630 (949) 595-7900.
3
<PAGE>
RISK FACTORS
An investment in the shares being offered by this Prospectus involves a
high degree of risk. In addition, this Prospectus contains forward-looking
statements within the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933, as amended (the "Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve
risk and uncertainties. The Company's actual results could differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. Accordingly, prospective investors should consider
carefully the following risk factors, in addition to the other information
contained in this Prospectus and the documents incorporated by reference in this
Prospectus concerning the Company and its business, before purchasing the shares
offered hereby.
Dependence on Significant Customer
During the fiscal year ended December 31, 1997, one of the Company's
customers, QVC Network, a cable shopping network which runs programs to market
the Company's products, accounted for approximately 29.0% of the Company's
revenues. In addition, with respect to its collectible products orders, QVC
Network provides a direct or transferrable letter of credit with its purchase
orders and the Company is materially dependent on this production financing in
order to fill its orders. The Company may continue to be dependent on this or
other significant customers, the loss of which could adversely affect the
Company's business.
Dependence on Key Product Lines
During the fiscal year ended December 31, 1997, two key product lines, the
Marie Osmond Collectibles and Annette Funicello Collectibles, accounted for
approximately 14.7% of the Company's sales. The Company has been marketing
these product lines through QVC and the Walt Disney Company since 1991, and the
Company has contracts with Marie, Inc. and Cello, Inc. to develop and promote
the product lines for five years beginning in 1998, with five year renewal
options. The contracts for development and promotion of the products are
dependent on minimum royalties being paid to Marie, Inc. and Cello, Inc.,
however, and the continuing sales of the product lines are dependent on the
continued acceptance of the product lines by QVC or other methods of
distribution. There can be no assurance that the Company will be able to
maintain the present volume of sales of the Marie Osmond Collectibles and
Annette Funicello Collectibles product lines, the loss of which could adversely
affect the Company's business.
Dependence on Key Personnel
The Company is dependent on its executive officers, the loss of any one of
whom would have an adverse effect on the Company. While the Company has
employment agreements with its President, Chief Operating Officer, Executive
Vice President, Chief Financial Officer and General Counsel for terms ending in
2001, with five year renewal options, unforeseen circumstances could cause
these persons to no longer be able to render their services to the Company. The
Company maintains key-man life insurance on the life of Mr. Louis L.
Knickerbocker, the President, Chief Executive Officer and Chairman of the
Company, in the amount of $1,000,000.
Dependence on New Products
The Company's future growth will be dependent on its ability to identify
and develop products which can be sold through the home shopping industry,
retail, direct response and the Internet at acceptable profit margins, to
acquire necessary rights to market and distribute such products, and to enter
into arrangements with third-party manufacturers to produce the products. There
can be no assurance that the Company will be successful in identifying and
developing quality products that may be successfully marketed through the home
shopping industry, retail, direct response and the Internet, in acquiring the
rights to such products, or in obtaining adequate supplies of such products from
third-party manufacturers. A failure to identify and develop new products for
marketing through the home shopping industry, retail, direct response or the
Internet would have a detrimental impact on the Company's future performance.
Dependence on Independent Contractor Artists and Celebrities
The Company relies on independent contractor artists to provide design work
in the development of products and programs. Additionally, a significant factor
in the Company's ability to market its products and programs to its customers is
the Company's ability to secure contracts with celebrities who will become
involved in the development of products and act as spokespersons for those
products. The contracts with celebrities and others are further contingent upon
the Company meeting its minimum royalty obligations under those contracts. The
continued success of the Company is dependent on its ability to attract and
retain such independent contractor artists and celebrity spokespersons. There
can be no assurance that the Company will be able to recruit and retain such
personnel.
4
<PAGE>
Industry Trends
The Company's historical growth has been based in part on both the
evolution of consumer tastes and preferences toward the Company's products and
the emergence of the home shopping, direct response and Internet segments.
While the Company is expanding into other marketing segments, the viability
among consumers of the home shopping, direct response and Internet marketing
segments will remain key to the Company's future operations. A change in
consumer tastes and preferences regarding the Company's products and the home
shopping, direct response and Internet marketing segments may have an adverse
effect on the Company's results of operations. There can be no assurance that
consumer tastes and preferences will continue to favor the Company's products
and marketing segments.
Competition
The growth of the home shopping industry has given rise to fierce
competition among product merchandisers for sales of products and programs
through the home shopping networks. The home shopping channels are finite in
number and have only 24 hours per day to air products. Air time during the
"prime time" viewing hours is especially limited. As a result, the buyers for
home shopping channels choose products which they feel are most likely to
provide them the highest response and return. The continued growth of the
Company is dependent on its ability to compete effectively with other companies
for the limited air time and purchasing decisions of the home shopping channels.
While the barriers to entry in the home shopping market are significant due to
the selectiveness of the buyers for the home shopping channels, the competitive
efforts of other large, well financed merchandisers may have an adverse effect
on the Company's results from operations.
Risks of Foreign Manufacturing
The Company maintains operations in Bangkok, Thailand and contracts for the
manufacture of its products in Thailand, Taiwan, China and other foreign
countries. As such, the Company is subject to risks inherent in foreign
manufacturing including the following: fluctuations in currency exchange rates;
economic and political instability; transportation delays; restrictive actions
by foreign governments; nationalizations; the laws and policies of the United
States affecting the importation of goods (including duties, quotas and taxes);
and trade and foreign tax laws. In particular, the Company's costs could be
effected adversely on a short term basis if the currency of any country in which
the Company conducts business appreciated significantly relative to the United
States dollar.
Substantially all of the Company's products are subject to United States
customs duties and regulations pertaining to the importation of goods. The
United States and the countries in which the Company's goods are manufactured
may, from time to time, impose new duties, tariffs, quotas or other charges or
restrictions, or adjust presently prevailing quotas, duties or tariff levels,
which could adversely effect the Company's financial condition or results from
operations or its ability to continue to import products at current or increased
levels. The Company cannot predict what regulatory changes may occur or the
type or amount of any financial impact on the Company which those changes may
have in the future.
Product Liability and Other Claims
The Company faces an inherent business risk of exposure to product
liability costs in the event that claims arise out of problems associated with
the use of the Company's products. The Company has not experienced any material
product liability costs or claims, however, the Company carries a policy of
product liability insurance against such contingencies. While the Company will
continue to attempt to take appropriate precautions, there can be no assurance
that it will avoid significant product liability exposure or that there will not
be a product liability claim in the future. The Company seeks to obligate
clients and suppliers of products to maintain product liability insurance
coverage for the benefit of the Company and to indemnify the Company against
such product liability. There can be no assurance, however, that such
arrangements can be made, or if made, will be effective to insulate the Company
from such claims. The Company may also be subject to other legal claims, such as
unfair competition and trademark infringement. Any legal claims, if brought,
could materially adversely affect the business or financial condition of the
Company. The Company maintains a policy of advertiser's liability insurance and
a policy of director's and officer's liability insurance. There can be no
assurance, however, that the liability insurance policies maintained by the
Company will be effective to insulate the Company from all covered claims.
Influence by Existing Shareholders
The Common Stock currently owned beneficially by the President and a Vice
President of the Company represents approximately 40% of the outstanding shares
of Common Stock. Accordingly, such persons will be able to exert influence over
the Board of Directors of the Company and direct the Company's affairs. The
Company's Articles of Incorporation and by-laws do permit cumulative voting,
however the founding shareholders of the Company will continue to influence the
Company's business and affairs.
5
<PAGE>
Common Stock Eligible for Future Sale
Approximately 36.8% of the Company's outstanding shares of Common Stock
are "restricted securities" and may in the future be sold in compliance with
Rule 144 adopted under the Act. Rule 144 generally provides that beneficial
owners of Common Stock who have held such Common Stock for one year may sell
within a three-month period a number of shares not exceeding 1% of the total
outstanding shares or the average trading volume of the shares during the four
calendar weeks preceding such sale. Future sales of restricted Common Stock
under Rule 144 could negatively impact the market price of the Common Stock.
Absence of Dividends
The Company has never paid any cash dividends on its Common Stock and does
not anticipate that it will pay dividends in the foreseeable future. Instead,
the Company intends to apply any earnings to the expansion and development of
its business.
Future Capital Requirements
In order to realize its objectives, the Company may have need for
additional capital in the future. If so, the Company intends to seek such
capital through public or private borrowing or equity financings. Any
additional equity financings may be dilutive to shareholders and debt financing,
if available, may involve restrictions on Common Stock dividends. Adequate
funds, whether through financial markets or other arrangements with corporate
partners or from other sources, may not be available when needed or on terms
acceptable to the Company. Insufficient funds may require the Company to delay,
scale back or eliminate some or all of its product development, market
development and corporate development programs with an adverse effect on the
Company's future performance.
Investments in Other Lines of Business
The Company has invested in several startup companies with innovative
products under development but who have no historical operational or financial
results. These investments include a 32.3% equity interest in Pure Energy
Corporation, which is developing a proprietary, patented alternative fuel, and a
13.2% equity interest in Ontro, Inc. (formerly Self Heating Container
Corporation of California) which develops self-heating containers for a variety
of food products. If successful, these equity investments could contribute to
the financial success of the Company. If unsuccessful, the Company could lose
the value of its investment in these companies, approximately $2.5 million.
There can be no assurance that these investments will prove successful.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Offered
Shares by the Selling Stockholders. The Company will receive proceeds from the
exercise of the Stock Purchase Warrants, and will use such proceeds for general
corporate purposes and working capital.
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock beneficially owned by such Selling Stockholders
as of July 10, 1998 and the number of Offered Shares which may be offered for
sale pursuant to this Prospectus by each Selling Stockholder. None of the
Selling Stockholders has held any position, office or other material
relationship with the Company or any of its predecessors or affiliates within
the last three years other than as a result of his or its ownership of shares of
Common Stock. The Offered Shares may be offered from time to time by the
Selling Stockholders named below. However, such Selling Stockholders are under
no obligation to sell all or any portion of such Offered Shares, nor are such
Selling Stockholders obligated to sell any such Offered Shares immediately under
this Prospectus. All information with respect to share ownership has been
furnished by the Selling Stockholders. Because the Selling Stockholders may
sell all or part of their Offered Shares, no estimates can be given as to the
number of shares of Common Stock that will be held by any Selling Stockholder
upon termination of any offering made hereby.
The number of shares shown in the following table represents an estimate of
the number of shares of Common Stock to be offered by the Selling Stockholders.
The actual number of shares of Common Stock issuable upon conversion of the
Convertible Debentures and exercise of the Stock Purchase Warrants is
indeterminate, is subject to adjustment and could be materially more than such
estimated number depending upon factors which cannot be predicted by the Company
at this time. The actual number of shares of Common Stock offered hereby, and
included in the Registration Statement of which this Prospectus is a part,
includes such additional shares of Common Stock as may be
6
<PAGE>
issued or issuable upon conversion of the Convertible Debentures and exercise of
the Stock Purchase Warrants as a result of stock splits, stock dividends and
anti-dilution provisions (including by reason of changes in the conversion price
of the Convertible Debentures in accordance with the terms thereof) in
accordance with Rule 416 of the Act.
<TABLE>
<CAPTION>
Beneficial Maximum Beneficial
ownership of number of shares ownership and percentage
Common Stock at of Common Stock of Common Stock after sale
Name July 10, 1998 approved for sale Number Percent
---- --------------- ----------------- ---------- -----------
<S> <C> <C> <C> <C>
Capital Ventures International 1,212,796(1) 1,212,796(1) 0(2) 0(2)
CC Investments, Inc. 1,516,102(1) 1,516,102(1) 0(2) 0(2)
Marshall Capital Management, Inc. 1,516,102(1) 1,516,102(1) 0(2) 0(2)
Total 4,245,000 4,245,000 0 0
</TABLE>
_____________________
(1) Includes shares of Common Stock which may be acquired through conversion
of Convertible Debentures and shares of Common Stock which may be acquired
upon exercise of Stock Purchase Warrants. Pursuant to a Securities
Purchase Agreement dated June 8, 1998, between the Selling Stockholders and
the Company, the Selling Stockholders purchased the Convertible Debentures
and Stock Purchase Warrants for $7,000,000. The Convertible Debentures
accrue interest at the rate of 6% per annum, and provide for the principal
and accrued interest to be convertible into shares of the Company's Common
Stock at a fixed conversion price of $4.02 for six months following June 8,
1998, and thereafter at the lower of the fixed conversion rate or a
variable conversion rate based on a discount of up to 10% to the average
price of the Company's Common Stock for the seven lowest trading days for a
30 day trading period preceding the conversion. The Stock Purchase
Warrants provide for the purchase of shares of the Company's Common Stock
at an exercise price of $4.72 per share. Except under certain
circumstances, none of the Selling Stockholders is entitled to convert the
Convertible Debentures or exercise the Stock Purchase Warrants to the
extent that such exercise or conversion would cause the Selling Stockholder
to beneficially own more than 4.99% of the total outstanding Common Stock
of the Company. Therefore, the number of shares set forth herein and which
a Selling Stockholder may sell pursuant to this Prospectus may exceed the
number of shares such Selling Stockholder may beneficially own as
determined pursuant to Section 13(d) of the Exchange Act. Moreover,
pursuant to the regulations of the National Association of Securities
Dealers, in the absence of stockholder approval, the aggregate number of
shares of Common Stock issuable to the Selling Stockholders at a discount
from market prices upon the conversion of the Convertible Debentures may
not exceed 19.99% of the outstanding shares of Common Stock on June 8,
1998. Unless stockholder approval is obtained to issue shares of Common
Stock in excess of the maximum amount set forth above, none of the Selling
Stockholders will be entitled to acquire more than its proportionate share
of such maximum amount. Any Convertible Debentures which may not be
converted and any Stock Purchase Warrants which may not be exercised
because of such limitation must be redeemed by the Company.
(2) Assumes the sale of all Offered Shares covered by this Prospectus. There
is no assurance, however, that any of the Selling Stockholders will sell
any or all of the Offered Shares registered hereunder.
PLAN OF DISTRIBUTION
The Offered Shares may be sold or distributed from time to time by the
Selling Stockholders, or by pledgees, donees or transferees of, or successors in
interest to, the Selling Stockholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or may acquire Offered Shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the Offered Shares may be effected in one or more of the
following methods: (i) ordinary brokers' transactions, which may include long or
short sales, (ii) transactions involving cross or block trades or otherwise on
the NASDAQ National Market System, (iii) purchases by brokers, dealers or
underwriters as principal and resale by such purchasers for their own accounts
pursuant to this Prospectus, (iv) "at the market" to or through market makers or
into an existing market for the Common Stock, (v) in other ways not involving
market makers or established trading markets, including direct sales to
purchasers or sales effected through agents, (vi) through transactions in
options, swaps or other derivatives (whether exchange listed or otherwise), or
(vii) any combination of the foregoing, or by any other legally available means.
In addition, the Selling Stockholders or their successors in interest may enter
into hedging transactions with broker-dealers who may engage in short sales of
Offered Shares in the course of hedging the positions they assume with the
Selling Stockholders. The
7
<PAGE>
Selling Stockholders or their successors in interest may also enter into option
or other transactions with broker-dealers that require the delivery by such
broker-dealers of the Offered Shares, which Offered Shares may be resold
thereafter pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the Offered Shares may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of Offered Shares for whom such broker-dealers may act as agent or to whom they
may sell as principal, or both (which compensation as to a particular broker-
dealer may be in excess of customary commissions). The Selling Stockholders and
any broker-dealers acting in connection with the sale of the Offered Shares
hereunder may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Act, and any commissions received by them and any profit realized by them
on the resale of Offered Shares as principals may be deemed underwriting
compensation under the Act. Neither the Company, nor any Selling Stockholder can
presently estimate the amount of such compensation. The Company knows of no
existing arrangements between any Selling Stockholder and any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of the
Offered Shares.
Except for the exercise price of the Stock Purchase Warrants, the Company
will not receive any proceeds from the sale of the Offered Shares pursuant to
this Prospectus. The Company has agreed to bear the expenses of the
registration of the shares, including legal and accounting fees, and such
expenses are estimated to be $50,000.
The Company has informed the Selling Stockholders that certain anti-
manipulative rules contained in Regulation M under the Exchange Act may apply to
their sales in the market and has furnished each Selling Stockholder with a copy
of such Rule and has informed them of the need for delivery of copies of this
Prospectus.
Selling Stockholders may also use Rule 144 under the Act to sell the shares
if they meet the criteria and conform to the requirements of such Rule.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997
have been audited by Deloitte & Touche LLP, independent auditors as stated in
their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for the Company by Mr. William R. Black. Mr.
Black is the Executive Vice President, General Counsel and Secretary of the
Company, and a member of the Company's Board of Directors, and owns beneficially
290,000 shares of the Company's Common Stock. None of the shares owned by Mr.
Black are included in the shares to be offered hereby.
MATERIAL CHANGES
There have been no material changes in the Company's affairs which have
occurred since the end of the latest fiscal year for which certified financial
statements were included in the latest annual report to securities holders and
which have not been described in the report on Form 10-KSB filed March 31, 1998,
the Quarterly Report on Form 10-Q filed May 14, 1998, or the Current Report on
Form 8-K filed June 9, 1998 under the Exchange Act.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The By-Laws of the Company provide that the Company may indemnify any
director, officer, agent or employee as specified in Section 317 of the
California Corporations Code. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed 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.
8
<PAGE>
THE L. L. KNICKERBOCKER CO., INC.
4,245,000 Shares of Common Stock
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
Prospectus, in connection with the offering contemplated hereby, and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or the Selling Stockholders. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the registered securities to which it relates. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained or incorporated
by reference herein is correct as of any time subsequent to its date.
9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses payable in connection with the distribution of the securities
being registered (estimated except for the registration fee), all of which will
be borne by the Company, are as follows:
<TABLE>
<S> <C>
Registration Fee $ 3,443.76
Legal Fees and Expenses $25,000.00
Accounting fees $10,000.00
Miscellaneous Expenses $11,556.24
----------
Total $50,000.00
==========
</TABLE>
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-Laws of the Company provide that the Company may indemnify any
Director, Officer, agent or employee as specified in Section 317 of the
California Corporations Code (the "Code"). Specifically, Article X 4. of the
Company's Amended By-Laws provides as follows:
The corporation may indemnify any Director, Officer, agent or employee as
to those liabilities and on those terms and conditions as are specified in
Sec. 317 of the Code. In any event, the corporation shall have the right to
purchase and maintain insurance on behalf of any such persons whether or
not the corporation would have the power to indemnify such person against
the liability insured against.
Section 317 of the California Corporations Code provides that a corporation
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any civil, criminal, administrative or investigative
proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that the person is or was
a director, officer, employee or other agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful.
No indemnification shall be made under Section 317 in the event that: (i)
the person seeking indemnification shall have been adjudged to be liable to the
corporation and its shareholders, unless, and only to the extent that the court
before which the proceeding was pending shall determine, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity to the extent that the court determines; (ii) the person seeks
indemnity for amounts paid in settling or otherwise disposing of a pending
action without court approval; or (iii) the person seeks indemnity for expenses
incurred in defending a pending action which is settled or otherwise disposed of
without court approval.
Section 317 provides that indemnification under that section shall be made
by the corporation only if authorized in the specific case, upon determination
that indemnification is proper because the person has met the applicable
standards of conduct set forth in subdivision 317(b) or 317(c), by (i) a
majority vote of a quorum of directors who are not parties to the proceeding;
(ii) if such a quorum is not obtainable, by independent legal counsel in a
written opinion; (iii) approval of the shareholders, with the shares owned by
the person to be indemnified not entitled to vote thereon; or
II-1
<PAGE>
(iv) the court in which the proceeding is or was pending upon application made
by the corporation or the person or the attorney or other person rendering
services in connection with the defense, whether or not the application by the
person or the attorney or other person rendering services in connection with the
defense is opposed by the corporation.
The indemnification provided for in Section 317 for acts, omissions or
transactions while acting in the capacity of or while serving as, a director or
officer of the corporation but not involving breach of duty to the corporation
and its shareholders shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise, to the extent the
additional rights to indemnification are authorized in the articles of
incorporation. Additionally, Section 317 provides that the corporation shall
have the power to purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
that capacity or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against that liability
under Section 317.
The Registrant's Articles of Incorporation do not provide for additional
rights to indemnification of directors, officers, employees or other agents,
however the board of directors of the Registrant, by resolution has provided for
the purchase and maintenance of liability insurance to cover the directors of
the Registrant.
Reference is hereby made to Item 17 entitled "Undertakings" of this
Registration Statement for the Company's undertaking with respect to submitting
claims for indemnification to a court of appropriate jurisdiction to determine
the question of whether such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended.
Item 16. EXHIBITS*
3.1 Amended Articles of Incorporation of the Registrant**
3.2 Amended By-Laws of the Registrant**
4.1 Securities Purchase Agreement dated June 8, 1998***
4.2 Form of Convertible Term Debenture***
4.3 Form of Stock Purchase Warrant***
4.4 Form of Registration Rights Agreement***
5. Opinion of William R. Black****
23.1 Consent of William R. Black (included in Exhibit 5).****
23.2 Consent of Deloitte & Touche, LLP****
_____________
* Exhibits 2, 8, 12, 15, 25, 26, 27, 28 and 99 have been omitted because they
are not applicable.
** Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-85230-LA).
*** Incorporated by reference to the Company's Current Report on Form 8-K filed
June 9, 1998.
**** Filed herewith.
II-2
<PAGE>
Item 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(i) and (ii) do not apply if the
-------- -------
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described under Item 15,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is. therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lake Forest, State of California on July 10, 1998.
THE L. L. KNICKERBOCKER CO., INC.
By: /s/ Louis L. Knickerbocker
--------------------------------------
Name: Louis L. Knickerbocker
Title: President, Chief Executive Officer and
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Louis L. Knickerbocker President, Chief Executive 7/10/98
------------------------------ Officer and Chairman ---------
Louis L. Knickerbocker
/s/ Anthony P. Shutts Chief Financial Officer 7/10/98
------------------------------ and Director ---------
Anthony P. Shutts
/s/ Gerald Margolis Director 7/10/98
------------------------------ ---------
Gerald Margolis
/s/ Tamara Knickerbocker Executive Vice President 7/10/98
------------------------------ and Director ---------
Tamara Knickerbocker
/s/ William R. Black Executive Vice President, 7/10/98
------------------------------ General Counsel, Secretary ---------
William R. Black and Director
/s/ F. Rene Alvarez, Jr. Director 7/10/98
------------------------------ ---------
F. Rene Alvarez, Jr.
II-4
<PAGE>
EXHIBIT INDEX
-------------
Number Description
- ------ -----------
3.1 Amended Articles of Incorporation of the Registrant**
3.2 Amended By-Laws of the Registrant**
4.1 Securities Purchase Agreement dated June 8 1998***
4.2 Form of Convertible Term Debenture***
4.3 Form of Stock Purchase Warrant***
4.4 Form of Registration Rights Agreement***
5. Opinion of William R. Black****
23.1 Consent of William R. Black (included in Exhibit 5).****
23.2 Consent of Deloitte & Touche, LLP****
_______________
* Exhibits 2, 8, 12, 15, 25, 26, 27, 28 and 99 have been omitted because they
are not applicable.
** Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-85230-LA).
*** Incorporated by reference to the Company's Current Report on Form 8-K filed
June 9, 1998.
**** Filed herewith.
II-5
<PAGE>
EXHIBIT 5
WILLIAM R. BLACK
ATTORNEY AT LAW
25800 Commercentre Drive
Lake Forest, California 92630
----------
Telephone (714) 595-7900
Facsimile (714) 595-7913
July 15, 1998
Board of Directors
The L. L. Knickerbocker Company, Inc.
25800 Commercentre Drive
Lake Forest, California 92630
Re: Registration Statement on Form S-3,
The L. L. Knickerbocker Co., Inc.
Ladies and Gentlemen:
I have acted as counsel to The L. L. Knickerbocker Company, Inc. (the
"Company") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by the Company pursuant to the Securities
Act of 1933, as amended, on or about July 15, 1998, with respect to 4,245,000
shares of the Company's Common Stock (no par value) (the "Common Stock") which
are being offered by the certain Selling Shareholders upon the conversion of
convertible debentures issued by the Company to those Selling Shareholders in
June 1998.
As counsel for the Company in connection with the preparation and
filing of such Registration Statement, I have examined, among other things, the
originals, or copies properly certified or otherwise identified to my
satisfaction as being in the form of the originals, of the following:
A. the corporate proceedings relating to the organization and
present existence of the Company, including its Registered Certificate of
Incorporation and all amendments thereto, and all acts of incorporators,
shareholders and directors in connection therewith;
B. the By-Laws of the Company as amended and as in effect at
relevant dates;
C. the Registration Statement as filed on form SB-2 pursuant to the
provisions of the Securities Act of 1933, as amended;
D. the annual report on form 10-KSB filed pursuant to Section 13(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") on March 31, 1998;
and
E. all reports filed on behalf of the Company pursuant to Section
13(a) or 13(d) or 15(d) of the Exchange Act.
<PAGE>
Board of Directors
The L. L. Knickerbocker Company, Inc.
Jul 15, 1998
Page 2
Based upon my examination of the foregoing and of other data and
evidence deemed by me necessary in rendering this opinion, and upon
consideration of applicable law, I am of the opinion that:
1. the Company is a corporation validly organized and existing under
the laws of the State of California and is qualified to transact business in
that state;
2. the Shares, when issued and sold in accordance with the offering
described in the Registration Statement, will be legally issued, fully paid, and
nonassessable.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Part II of the Registration Statement and
to the references made to me in the Registration Statement.
Very truly yours,
LAW OFFICES OF WILLIAM R. BLACK
/s/ William R. Black
---------------------------------
By: William R. Black
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The L.L. Knickerbocker Co., Inc. on Form S-3 of our report dated March 31, 1998
appearing in the Annual Report on Form 10-KSB of The L.L. Knickerbocker Co.,
Inc. for the year ended December 31, 1997.
We also consent to the reference to us under the heading "Experts" in this
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
July 10, 1998
