SWDocIDNYC 212430v3
NYC 212430v3
As filed with the Securities and Exchange Commission on December 28, 2001
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
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MDI ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)
Delaware 73-1515699
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
201 Ann Street
Hartford, Connecticut 06103
(860) 527-5359
(Address of Principal Executive Offices)
MDI Entertainment, Inc. 1998 Stock Option and Award Plan, as amended
Individual Stock Option Agreements
(Full titles of the plans)
Steven M. Saferin, President
201 Ann Street
Hartford, Connecticut 06103
(860) 527-5359
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
with a copy to:
Kenneth R. Koch, Esq.
Mintz Levin Cohn Ferris Glovsky and Popeo, P.C.
666 Third Avenue
New York, New York 10017
(212) 935-3000
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Amount to be maximum maximum
securities to be registered registered(1) offering price aggregate Amount of
per share(2) offering price(2) registration fee
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Common Stock, $.001 par value 607,499 (3) $ .33 $200,475 $50.12
795,000 (3) $1.32 $1,049,400 $262.35
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Common Stock, $.001 par value 191,404 (4) $1.30 $248,825 $62.21
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Common Stock, $.001 par value 300,000 (5) $1.30 $390,000 $97.50
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Common Stock, $.001 par value 17,500 (6) $1.38 $24,150 $6.04
Total: $478.22
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(1) The maximum number of shares of common stock, par value $.001 per
share ("Common Stock"), which may be granted as restricted stock awards or
issued upon the exercise of options granted under the MDI 1998 Stock Option and
Award Plan (the "1998 Plan") and certain Stock Option Agreements (together with
the 1998 Plan, the "Plans") granting options to directors are subject to
adjustment in accordance with certain anti-dilution and other provisions of said
Plans. Accordingly, pursuant to Rule 416 under the Securities Act of 1933, as
amended (the "Securities Act"), this Registration Statement covers, in addition
to the number of shares stated above, an indeterminate number of shares which
may be subject to grant or otherwise issuable after the operation of any such
anti-dilution and other provisions.
(2) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the Securities
Act as follows: (i) in the case of shares of Common Stock which may be purchased
upon exercise of outstanding options, the fee is calculated on the basis of the
price at which the options may be exercised; (ii) in the case of (A) shares of
Common Stock available for grant as restricted stock awards or for which options
have not yet been granted and the option price of which is therefore unknown,
and (B) the shares of Common Stock previously issued pursuant to the exercise of
options granted under the Plans, the fee is calculated on the basis of the
average of the high and low sale prices per share of the Common Stock on the
Over-The-Counter Bulletin Board as of December 27, 2001.
(3) Represents the number of shares of Common Stock which are issuable
upon the exercise of options previously granted under the 1998 Plan.
(4) Represents the number of shares of Common Stock (i) from options
already exercised and (ii) which are available under the 1998 Plan for grant as
restricted stock awards or issuable upon the exercise of options not yet
granted.
(5) Represents the number of shares of Common Stock which that were
issued upon the exercise of options granted pursuant to a Stock Option Agreement
with a director outside of the 1998 Plan.
(6) Represents the number of shares of Common Stock which are issuable
upon the exercise of options previously granted pursuant to a Stock Option
Agreement with a director outside of the 1998 Plan.
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EXPLANATORY NOTE
This Registration Statement relates, in part, to the registration of
1,441,266 shares of common stock, par value $.001 per share, of MDI
Entertainment, Inc. authorized for issuance under the 1998 Stock Option and
Award Plan and individual Stock Option Agreements (collectively, the "Plans"),
and the filing of a resale prospectus with respect to such shares. In accordance
with the instructional Note to Part I of Form S-8 as promulgated by the
Securities and Exchange Commission, the information specified by Part I of Form
S-8 has been omitted from this Registration Statement on Form S-8 for offers of
Common Stock pursuant to the Plans. The prospectus filed as part of this
Registration Statement has been prepared in accordance with the requirements of
Form S-3 and may be used for reofferings and resales of registered shares of
common stock which have been and/or may hereafter be issued upon the exercise of
options which have been and/or may hereafter be granted under any of the Plans.
PROSPECTUS
MDI Entertainment, Inc.
1,911,403 Shares of Common Stock
Par Value $.001 Per Share
issued or issuable pursuant to
MDI Entertainment, Inc. 1998 Stock Option and Award Plan, as amended
Individual Stock Option Agreements
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The shares of common stock, par value $.001 per share, offered hereby
are shares which have been or may in the future be issued upon the exercise of
stock options which have been or may in the future be granted under our 1998
Stock Option and Award Plan or individual Stock Option Agreements, to be sold by
our stockholders identified herein. These persons are referred to in this
prospectus as the "Selling Stockholders." See "Selling Stockholders" for
information about these persons.
Some or all of the shares offered under this prospectus may be offered
for sale from time to time by the Selling Stockholders or by pledgees, donees,
transferees, or other successors in interest. These sales may be made on one or
more exchanges, in the over-the-counter market, or otherwise, at prices and on
terms then prevailing, or at prices related to the then-current market price, or
in negotiated transactions or otherwise, or by underwriters pursuant to an
underwriting agreement in customary form, or in a combination of any such
methods of sale. The Selling Stockholders and any broker-dealers (including
underwriters) who may participate in a sale of the shares may be deemed to be
statutory underwriters within the meaning of the Securities Act of 1933, as
amended, and the commissions paid or discounts or concessions allowed to any of
such broker-dealers (including underwriters) by any person, as well as any
profits received on the resale of the Shares if any of such broker-dealers
(including underwriters) should purchase any shares as a principal, may be
deemed to be underwriting discounts and commissions under the Securities Act.
All discounts, commissions or fees incurred in connection with the sale of the
shares offered hereby will be paid by the Selling Stockholders or by the
purchasers of the shares, except that the expenses of registering the shares and
preparing and filing this Prospectus with the Securities and Exchange
Commission, and of registering or qualifying the shares under the blue sky laws
of any jurisdiction necessary to permit the distribution as described in this
prospectus, will be paid by us. See "Plan of Distribution" for more information
about the sale of the shares offered by this prospectus. We will not receive any
of the proceeds from the sale of the shares by the Selling Stockholders.
Our common stock is traded on the Over-The-Counter Bulletin Board under
the symbol LTRY:OB.
On December 27, 2001, the closing bid price for our common stock, as
reported by the OTC BB, was $1.30.
The Common Stock Offered Hereby Involves a High Degree of Risk.
Prospective Investors Should Consider Carefully the Risk Factors
Indicated under "Risk Factors" on page 4.
These Securities Have Not Been Approved or Disapproved by the Securities and
Exchange Commission or any State Securities Authority nor Has The Commission or
Any State Securities Authority Passed Upon the Accuracy or Adequacy of This
Prospectus. Any Representation to the Contrary is a Criminal Offense.
The date of this Prospectus is December 28, 2001.
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NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY SELLING STOCKHOLDER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SHARES OF COMMON STOCK OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION WHERE IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to certain informational reporting requirements of the
Securities Exchange Act of 1934 and, in accordance with the Exchange Act, file
reports, proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. The SEC maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
SEC's Web site is http://www.sec.gov.
We will provide without charge to each person, including beneficial
owners, to whom this prospectus is delivered, upon the written or oral request
of such person, a copy of any and all of the documents that have been or may be
incorporated by reference in this prospectus, 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 MDI
Entertainment, Inc., 201 Ann Street, Hartford, Connecticut 06103, Attention:
Kenneth M. Przysiecki. Our telephone number is (860) 527-5359.
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2
TABLE OF CONTENTS
PROSPECTUS...................................................................1
RISK FACTORS.................................................................4
THE COMPANY................................................................. 9
SELLING STOCKHOLDERS........................................................12
PLAN OF DISTRIBUTION........................................................15
LEGAL MATTERS...............................................................15
EXPERTS.....................................................................15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................16
3
RISK FACTORS
AN INVESTMENT IN THE SHARES BEING OFFERED BY THIS PROSPECTUS INVOLVES A
HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE, THE FOLLOWING FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY
THIS PROSPECTUS. THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE
FORWARD-LOOKING STATEMENTS WITHIN THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. REFERENCE IS MADE IN PARTICULAR TO THE
DISCUSSION SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" IN OUR TRANSITION REPORT ON FORM 10-KSB FOR
THE SEVEN MONTHS ENDED DECEMBER 31, 2000 AND OUR QUARTERLY REPORTS ON FORM
10-QSB FOR THE QUARTERS ENDED MARCH 31, 2001, June 30, 2001 AND September 30,
2001 AND UNDER "BUSINESS" IN THE FORM 10-KSB, INCORPORATED IN THIS PROSPECTUS BY
REFERENCE. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS THAT INVOLVE A
NUMBER OF UNCERTAINTIES INCLUDING THOSE SET FORTH IN THE RISK FACTORS BELOW.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. MDI IS ALSO SUBJECT TO MORE GENERAL RISKS DESCRIBED
IN THE SECTION "SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS" BEGINNING ON
PAGE 17.
We have had losses.
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Although we had net income of $1,729,165 for the nine months ended
September 30, 2001, we incurred net losses of $(2,211,051) and $(1,985,105) for
the seven month transition period ended December 31, 2000 and the fiscal year
ended May 31, 2000, respectively. We cannot assure you that we will operate
profitably in the near future.
We have had a negative net worth.
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Although we had a positive net worth of $762,933 as of September 30,
2001, we had a negative net worth of $(1,483,635) as of December 31, 2000. We
cannot assure you that we will be able to continue operating profitably in the
future or at all.
We may continue to need financing or additional equity to meet our future
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capital requirements.
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As of September 30, 2001, our current liabilities (including "billings
in excess of costs and estimated earnings on uncompleted contracts" totaling
$2,510,757) exceeded our current assets by $960,106.
We raised $1,750,000 on August 4, 1999, through the sale of Series A
Convertible Preferred Stock in a private sale to an investor. We raised an
additional $750,000 from the issuance of a convertible subordinated debenture in
September of 1999. In September, 2000 we raised an additional $520,000 in the
form of two short-term loans originally maturing on January 31, 2001 from our
President and Chief Executive Officer, and from an unrelated individual. The
loan to the unrelated individual of $260,000 was subsequently extended until May
15, 2001.
4
In November and December 2000, we raised $200,000 in the form of
short-term loans that matured on May 15, 2001 from unaffiliated parties.
However, we may require additional financing to meet our needs. We have
not determined the amount we may seek to raise or the form of this financing
(i.e. debt or equity). We cannot assure you that we will obtain additional
financing for future operations or capital needs on favorable terms if at all.
The Lottery Channel is claiming that we bear all costs and expenses in
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connection with the termination of our merger transaction with them.
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On November 7, 2000, we were notified that we had been named as a
defendant in a complaint filed by The Lottery Channel, Inc. on November 2, 2000
in the Hamilton County, Common Pleas Civil Division, Cincinnati, Ohio, arising
from our decision to terminate our merger agreement with Lottery Channel.
Lottery Channel is seeking to recover $1,763,343.29 in costs and expenses,
damages in excess of $25,000, attorney's fees and cost incurred in prosecuting
the action, punitive damages and any other relief to which it is entitled.
We believe that the lawsuit is without merit and we are vigorously
defending our position, as well as asserting a variety of counterclaims against
Lottery Channel, including a demand that Lottery Channel pay certain expenses
under the termination provisions of our merger agreement.
Notwithstanding the merits of the action, we may incur substantial costs
defending the action and there can be no assurance as to the outcome of any such
litigation.
We may be unable to maintain or renew all our current licenses.
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Our success will be dependent upon maintaining our current licenses for
the rights to use names and well-known logo bearing merchandise. The terms of
the current licenses are generally for 1.5 to 3 years, although they may be
terminated sooner under certain circumstances. We cannot assure you that the
current licenses will be renewed once they expire.
We may be unable to provide merchandise to the lotteries when needed.
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We supply the lotteries with logo bearing merchandise related to our
contracts with them. We obtain approximately 95% of this merchandise from
authorized representatives of the licensor. We cannot assure you that the logo
bearing merchandise will be available from such authorized representatives when
needed by us to satisfy our obligations to the lotteries.
We may be unable to acquire new licenses.
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Our success is dependent on our ability to obtain rights to use well
known entertainment and other similar properties for use on lottery tickets and
related merchandise. We cannot assure you that we will continue to obtain such
licenses on favorable terms or at all.
We depend on customer relationships with North American lotteries.
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Many of our licensing rights are, by design, currently limited to United
States, North American or worldwide lotteries. There are currently 40 United
States lotteries and five additional Canadian lotteries. The extremely limited
potential customer base means that if any target lottery refuses to purchase a
particular promotion from us or if it only uses a promotion once, there may be a
significant negative impact on our revenue and earnings. The four state
lotteries that purchased promotions accounting for the highest percentage of our
revenues during the nine months ended September 30, 2001 were New Jersey,
California, Pennsylvania, and Florida, with 18%, 12.7%, 10.7% and 8.7%,
respectively. We cannot assure you that these lotteries will maintain the same
level of promotions or that other lotteries will increase promotions beyond
current levels, or enter into contracts with us at all.
5
We have no on-going sources of revenue.
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Our revenues are derived on a contract-by-contract basis from state
lotteries. There are no regular on-going sources of revenue at the present time
and we must continually create and market new promotions to our lottery
customers. Lotteries frequently move start dates for promotions thereby causing
gaps in our cash flow. Moreover, the useful life of a license is generally
relatively short as the novelty of the game or the popularity of the licensed
material wanes over time. We may depend on a particular promotion in any given
year, and a decrease in sales of the promotion or the loss of the underlying
license would seriously impact our revenues and earnings.
We may be adversely affected by government regulation of lotteries and gambling.
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Since most lotteries are government agencies with lottery executives
appointed by the state's governor or other high ranking official, opportunities
or projects in progress can be slowed after an election if the incumbent
governor is not reelected.
There is a growing concern in the United States about the explosion of
gaming. The creation of The National Gambling Impact Study Commission and its
released report, may negatively impact state lotteries and other gaming
activities and hence our business. We cannot assure you that there will not be
an adverse change in the lottery laws of any jurisdiction in which we do
business. In addition, we cannot predict the nature of the regulatory process in
any jurisdiction that may authorize the use of instant tickets in the future.
Any such regulatory process may be burdensome to us and our customers or their
key personnel and could include requirements that we would be unable to satisfy.
Existing stockholders are able to exercise control over us.
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Our officers and directors beneficially own approximately 45% of our
outstanding common stock and Steven M. Saferin owns approximately 34%. Our
Certificate of Incorporation does not provide for cumulative voting for the
Board of Directors. As a result, Steven M. Saferin and management have
substantial influence over the election of a majority of our directors and the
outcome of issues submitted to a vote of our stockholders.
The loss of the services of Steven M. Saferin could harm our business.
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Our success depends to a significant extent on the performance and
continued service of Steven M. Saferin, an officer and director. We are
negotiating the extension of our employment agreement with Mr. Saferin, which
expired on August 8, 2001. We do not carry key man insurance.
Intense competition could reduce our market share.
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We have traditionally acquired exclusive rights to license entertainment
and other properties to the U.S. lottery industry. We have faced only one
situation in which there was substantial competition in acquiring such rights
and we were the successful bidder for these rights. However, there are several
organizations that also design and promote lottery games and promotions based on
licensed brands. One of these companies is pursuing the types of entertainment
properties we have targeted. In addition, it is possible that potential
licensors may design their own lottery games and seek to market them directly to
the lotteries, thus bypassing us. Other potential sources of competition are the
printers of instant tickets who, to improve their own competitive standing,
might attempt to acquire licensing rights for various properties to offer
exclusively to their lottery customers and enhance their competitive bidding for
lottery printing contracts.
6
We do not anticipate paying any dividends.
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We have never paid any cash or other dividends on our common stock. At
present, we do not anticipate paying dividends on our common stock in the
foreseeable future and intend to devote any earnings to the development of our
business. Investors who anticipate the need for immediate income from their
investment should refrain from purchasing our common stock.
Our Common Stock lacks liquidity.
--------------------------------
Our Common Stock is not traded on the Nasdaq Stock Market or any stock
exchange. We cannot assure you that a stockholder would be able to buy or sell
shares when desired.
We indemnify our directors and officers against certain expenses
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and liabilities.
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So far as permitted by the Delaware General Corporation Law, our
Certificate of Incorporation and By-Laws provide that we will indemnify our
directors and officers against expenses and liabilities they incur to defend,
settle or satisfy any civil or criminal action brought against them on account
of their being or having been directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or to have engaged in
willful misconduct. As a result of such provisions, stockholders may be unable
to recover damages against our directors and officers for actions taken by them
which constitute negligence or a violation of their fiduciary duties, which may
reduce the likelihood of stockholders instituting derivative litigation against
directors and officers and may discourage or deter stockholders from suing our
directors, officers, employees and agents for breaches of their duty of care,
even though such action, if successful, might otherwise benefit us and our
stockholders.
Future sales of common stock by our existing stockholders could adversely affect
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our stock price.
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The market price of our common stock could decline as a result of sales
of a substantial number of shares of our common stock in the market, or the
perception that such sales could occur. Such sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. As of December 28, 2001, we had 11,617,925
outstanding shares of common stock. Of these shares, 6,046,972 shares of common
stock are freely tradable, not including an aggregate of 8,088,617 shares
(including shares underlying certain options, warrants and notes) which may be
sold pursuant to an effective registration statement.
In March 2001, Scientific Games, Inc. converted its subordinated
convertible debenture into $375,000 shares of common stock at a conversion rate
of $2.00 per share.
In November 2001, 444 shares of Series B convertible preferred stock,
held by eLot, Inc., were converted into 444,444 shares of common stock
As of December 28, 2001 options to purchase a total of 1,434,166 shares
of our common stock are outstanding. Of such options, options to purchase
639,166 shares are currently exercisable. In addition, warrants to purchase a
total of 2,383,656 shares of our common stock are outstanding and all of such
warrants are exercisable. Shares issued upon the exercise of such options and
warrants will be eligible for resale in the public market from time to time.
We have filed a registration statement covering an aggregate of
2,373,621 shares including shares of our common stock issued upon conversion of
our Series A Preferred Stock and subordinated convertible debenture and shares
issuable upon exercise of certain warrants. All shares covered by that
registration statement are freely tradable. If a large number of such shares are
sold in the public market, the price of our common stock may fall.
7
There are certain anti-takeover effects associated with the issuance of "Blank
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Check" preferred stock.
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Our Certificate of Incorporation authorizes our Board of Directors to
issue up to 5,000,000 shares of "blank check" preferred stock, of which 2,027
shares has been designated Series A Preferred Stock, 444 shares has been
designated Series B Preferred Stock and 2,100 shares has been designated Series
C Preferred Stock. All of the Series A and B Preferred Stock has been converted
into common stock. The securities representing the Series C Preferred Stock were
to be returned to us in an exchange of stock in connection with our transactions
with Oxford International, Inc. Oxford has refused to honor our exchange right
and we filed a Motion For Temporary Restraining Order and Preliminary Injunction
and a Verified Complaint in the United States District Court of the District of
Maryland against Oxford and its principal, Gregory C. Dutcher.
The Board of Directors, without stockholder approval, may fix all the
rights of the preferred stock. The issuance of such stock could, among other
results, negatively affect the voting power of the holders of common stock.
Under certain circumstances, the issuance of the preferred stock would
make it more difficult for a third party to gain control of us, discourage bids
for the common stock at a premium, or otherwise adversely affect the market
price of our common stock. Such provisions may discourage attempts to acquire
us.
We have no arrangement, commitment or understanding with respect to the
issuance of our preferred stock, other than with respect to the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. We
cannot assure you, however, that we will not, in the future, issue additional
shares of preferred stock.
We may be subject to certain risks by doing business internationally.
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As we begin to market our properties to international lotteries and
explore international lottery opportunities, we may be subject to certain risks
associated with doing business over-seas, including the necessity of complying
with local laws and regulations and political, economic and other uncertainties.
In addition, because some of our existing and prospective customers deal
predominantly in non-U.S. currencies, we are exposed to exchange rate risks,
which may cause our financial results to suffer. The obligations of customers
with substantial revenues in non-U.S. currencies may be subject to unpredictable
and indeterminate increases in the event those currencies lose value against the
U.S. dollar. As a result of the risks in currency exchange, some of our revenues
may decrease. Although we expect to invoice our sales of services in U.S.
dollars, our prospective customers may derive their revenues in currencies other
than U.S. dollars. These customers may also become subject to exchange control
restrictions limiting their ability to convert their revenue currencies into
U.S. dollars, in which case they may not be able to pay us in U.S. dollars.
8
To date, our non-U.S. business is principally done with Canada and for
which we have experienced stable exchange rates during the time we have had
ongoing contracts. We currently have no hedging contracts or other financial
instruments outstanding which would mitigate the effect of a currency
translation loss.
THE COMPANY
We are a Delaware corporation originally incorporated on December 29,
1994 under the name Puff Process, Inc. Our name was changed to MDI
Entertainment, Inc. and a one share for one hundred reverse stock split was
effected in connection with the purchase, in August 1997, of both Media Drop-In
Productions Inc., a Delaware corporation, and MDI-Missouri, Inc., a Missouri
corporation, in exchange for 4,800,000 shares of our common stock, and notes in
the aggregate principal amount of $300,000. The acquisition was effected through
reverse mergers with two of our wholly-owned subsidiaries. These transactions
resulted in a change in control, with Steven M. Saferin holding approximately
56% of the outstanding shares of our common stock. Pre-merger holders of Puff
Process, Inc. held approximately 32.1% of the outstanding shares of common stock
immediately after the merger.
We specialize in creating, marketing and implementing
entertainment-based promotions to North American lotteries. Our principal
business has been the scratch ticket segment of the government lottery industry,
although we have run on-line entertainment-based promotions with a lotto and
daily numbers type games featuring our licensed Harley-Davidson(R) logo. Our
lottery promotions feature well-known brand names and entertainment properties
licensed to us and designed to attract new lottery players while providing a new
experience for existing lottery players. Our current promotions feature a wide
variety of such brand names and entertainment properties including:
o Wheel of Fortune(R)
o Jeopardy(TM)
o Harley-Davidson(R)
o Twilight Zone(TM)
o Betty Boop(TM)
o Louisville Slugger(R)
o Dick Clark's American Bandstand(R)
o The Nashville Network(R)/TNN
o Country Music Television(R)/CMT
o Heroes of Space(TM)
o The Pink Panther(TM)
o The Outer Limits(TM)
o Dale Earnhardt(R)
o Dale Earnhardt, Jr.(R)
o Jeff Burton(R)
o Mark Martin(R)
o Bill Elliott(R)
o Matt Kenseth(R)
o Let's Get Ready To Rumble(R)
o Sports Legends(R)
o Ray Charles(R)
o SPAM(R)
o CowParade(R)
o Hollywood Sign(TM)and Hollywood Walk of Fame(TM)
o Elvis Presley(R)
o Emmett Kelly, Jr.(R)
o Hollywood Squares(R)
o Tabasco(R)
o Miss Cleo(R)
o Lionel(TM)
o World Cup Soccer(R)
o Elliott Saddler(TM)
o Ken Schrader(TM)
o Magic 8 Ball(R)
o Universal Studios(R)Monsters
9
We developed our strategy of identifying such properties in early 1996.
Prior to that time, we had developed a series of promotions that utilized
popular videotapes, compact discs and audiocassettes as second chance lottery
prizes. Those promotions enabled us to develop an expertise in sourcing and
distributing products as second chance lottery prizes. They also enabled us to
develop a reputation with lottery personnel as a reliable organization attuned
to the special needs of lotteries and their players.
We derive over ninety-five percent (95%) of our revenues from lotteries
in two distinct ways. First, we will usually charge a lottery a license and
royalty fee to utilize a particular licensed property as a lottery game. License
fees are a fixed assessment, while royalties are a percentage of the printing
cost of the tickets. Contracts for licensed properties typically include an
up-front license fee and a royalty based on the manufacturing cost of tickets.
Manufacturing costs of tickets usually range from $10.00 per thousand to $30.00
per thousand. Actual costs depend on the size of the ticket and the quantity
printed. Ticket quantities range from about one million to as many as 60 million
with an average quantity of about five million.
Our second source of lottery revenue is the sale of logo bearing
merchandise to the lottery as second-chance prizes. In merchandise-based lottery
games, between 5% to 10% of a lottery's prize fund is typically used for the
purchase of merchandise related to the property the lottery is utilizing.
Typically, we purchase merchandise from other licensees of the property and
resell the merchandise to the lottery at a price that is designed to include
overhead costs, profit, shipping and handling and any marketing support we
provide the lottery such as brochures, posters or other advertising assistance
for which there are no separate charges.
10
SELLING STOCKHOLDERS
The Selling Stockholders are offering hereby shares which have been or
may hereafter be acquired by them upon the exercise of options granted under the
1998 Stock Option and Award Plan and individual Stock Option Agreements. The
names of additional Selling Stockholders and the number of shares offered hereby
by them may be added to this prospectus from time to time by an addendum or
supplement to this prospectus. Other persons who acquire shares from the Selling
Stockholders may also be identified as Selling Stockholders by means of an
addendum or supplement to this prospectus.
Steven M. Saferin is our President, Chief Executive Officer and a
director.
On January 19, 2000, Mr. Saferin exchanged a portion of his stock for a
note held by a third party and made by us with a remaining principal of
$316,038. The note bears interest at 8% per annum and is payable in monthly
installments of $14,300 with a final payment date of December 1, 2001.
On May 31, 2000, Mr. Saferin loaned the President and Chief Executive
Officer of The Lottery Channel, Inc. $108,000 personally for the operational
needs of The Lottery Channel and to facilitate the then proposed merger. Mr.
Saferin received a promissory note bearing interest of 11% per annum.
On September 1, 2000, Mr. Saferin loaned us $260,000 and received a note
payable on demand, bearing interest at a rate of 10% per annum. On September 8,
2000, as part of a loan transaction, the note was replaced with a note secured
by substantially all of our assets, payable on January 31, 2001, which bears
interest at a rate of 10% per annum. This note was extended to May 15, 2001.
On March 20, 2001 Mr. Saferin guaranteed our $742,800 performance bond
provided to the California lottery.
Mr. Saferin is entitled to a commission equal to 2% of our gross
revenue, pursuant to his employment agreement. Mr. Saferin waived the right to
approximately $57,534 and $67,964 of commissions for the seven months ended
December 31, 2000 and 1999, respectively.
Todd P. Leavitt is one of our directors. Tulip Media Ltd., a Los
Angeles, CA entertainment company that Mr. Leavitt is associated with, from time
to time does work in the entertainment field for us.
S. David Fineman is one of our directors. Fineman & Bach, P.C., a
Philadelphia PA law firm that Mr. Fineman is associated with, from time to time
does legal work for us.
William G. Malloy is one of our directors. In October 1999, Mr. Malloy
was invited to join our Board of Directors. Mr. Malloy was President and Chief
Executive Officer of Scientific Games, Inc. which executed a strategic alliance
with us. In connection with such alliance, Scientific Games purchased a $750,000
convertible subordinated debenture from us. In addition, Steven M. Saferin sold
333,333 shares of common stock held by him to Scientific Games. Scientific Games
was acquired by Autotote Corporation on September 7, 2000. Mr. Malloy is
currently a consultant to Autotote Corporation.
Robert Wussler is one of our directors.
Kenneth M. Przysiecki is our Vice President of Accounting and
Administration and a director.
Robert R. Kowalczyk is our Vice President and General Manager.
Charles W. Kline is our Vice President of Sales and Marketing.
11
The following table sets forth certain information with respect to the
Selling Stockholders as of December 28, 2001.
Number of
Shares Number of Percentage of
Beneficially Shares to be Class to be
Owned Number of Beneficially Beneficially
Prior to Shares Being Owned After Owned After
Name Offering(1) Offered(2) Offering(3) Offering
------------------------------------------------------------------------------------------
Steven M. Saferin 4,020,169(4) 250,000 3,795,169 34%
Todd P. Leavitt 155,100(5) 250,000 5,100 *
S. David Fineman 160,200(6) 250,000 10,200 *
William G. Malloy 162,750(7) 250,000 12,750 *
Robert Wussler 307,650(8) 400,000 7,650 *
Kenneth M. Przysiecki 250,600(9) 80,000 220,600 2.2%
Robert R. Kowalczyk 30,000(10) 60,000 0 *
Charles W. Kline 21,725(11) 50,000 1,725 *
Evelyn Yenson 10,000(12) 25,000 10,000 *
Debbie Amundson 10,848(13) 37,948 0 *
Marcia Firsick 12,948(14) 37,948 0 *
Mariann Rodriguez 7,299(15) 22,299 0 *
Patricia McGuiness 4,450(16) 14,450 0 *
John Monaco 3,825(17) 15,000 0 *
Brenda Torres 766 766 0 *
Shares reserved for
future grants under
Plan 0 19,167 0 *
-------------- ------------ ------------
* Less than 1% of the outstanding Common Stock.
12
(1) Includes all shares of Common Stock owned by the Selling Stockholder and
Shares of Common Stock which the Selling Stockholder has the right to
acquire, through the exercise of options including those granted under
the Plans, within 60 days after the date hereof.
(2) Includes certain shares of Common Stock acquired by the Selling
Stockholder pursuant to the exercise of options granted under the Plans
and all shares of Common Stock which the Selling Stockholder has the
right to acquire, through the exercise of options granted under the
Plans, whether or not such right has yet become exercisable or will
become exercisable within 60 days after the date hereof.
(3) Includes shares of Common Stock owned by the Selling Stockholder and
Shares of Common Stock which the Selling Stockholder has the right to
acquire, through the exercise of options, other than those granted under
the Plans, within 60 days after the date hereof. Assumes all shares
registered pursuant hereto will be sold, although there can be no
assurance that any of the Selling Stockholders will offer for sale or
sell any or all of the Common Stock offered by them pursuant to this
Prospectus. Also assumes that no other shares are acquired or
transferred by the Selling Stockholder.
(4) Includes 225,000 shares which Mr. Saferin has the right to acquire upon
the exercise of options. Excludes 25,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(5) Includes 50,000 shares of Common Stock beneficially owned directly by
the Leavitt Family Trust and 100,000 shares which Mr. Leavitt has the
right to acquire upon the exercise of options. Excludes 100,000 shares
underlying options which will not become exercisable within 60 days of
the date hereof.
(6) Includes 100,000 shares which Mr. Fineman has the right to acquire upon
the exercise of options. Excludes 100,000 shares underlying options
which will not become exercisable within 60 days of the date hereof.
(7) Includes 150,000 shares which Mr. Malloy has the right to acquire upon
the exercise of options. Excludes 100,000 shares underlying options
which will not become exercisable within 60 days of the date hereof.
(8) Excludes 100,000 shares underlying options which will not become
exercisable within 60 days of the date hereof.
(9) Includes 10,000 shares which Mr. Przysiecki has the right to acquire
upon the exercise of options. Excludes 50,000 shares underlying options
which will not become exercisable within 60 days of the date hereof.
(10) Includes 10,000 shares which Mr. Kowalczyk has the right to acquire upon
the exercise of options. Excludes 30,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(11) Includes 13,333 shares which Mr. Kline has the right to acquire upon the
exercise of options. Excludes 30,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
13
(12) Excludes 25,000 shares underlying options which will not become
exercisable within 60 days of the date hereof.
(13) Includes 5,000 shares which Ms. Amundson has the right to acquire upon
the exercise of options. Excludes 25,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(14) Includes 5,000 shares which Ms. Firsick has the right to acquire upon
the exercise of options. Excludes 25,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(15) Includes 5,000 shares which Ms. Rodriguez has the right to acquire upon
the exercise of options. Excludes 15,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(16) Includes 1,666 shares which Ms. McGuiness has the right to acquire upon
the exercise of options. Excludes 10,000 shares underlying options which
will not become exercisable within 60 days of the date hereof.
(17) Excludes 15,000 shares underlying options which will not become
exercisable within 60 days of the date hereof.
USE OF PROCEEDS
We are unable to predict the time, if ever, when options and awards will
be granted under the Plans and, in the case of options, exercised. Therefore, we
are unable to estimate the net proceeds from the grants and exercises. Moreover,
the Plans permit certain methods of exercising options which would not result in
us receiving any cash proceeds. Accordingly, the proceeds from the grant of
restricted stock awards, if any, and from the sale of shares to the Selling
Stockholders upon the exercise of options, if any, have not been allocated for
any particular purpose. We will not receive any proceeds from the subsequent
sale of shares by the Selling Stockholders.
14
PLAN OF DISTRIBUTION
The shares may be offered and sold from time to time by the Selling
Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made from time to time on one or more
exchanges or in the over-the-counter market, or otherwise, at prices and on
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions. The shares may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account; (c) an
exchange distribution in accordance with the rules of such exchange; (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (e) a combination of any such methods of sale. In effecting
sales, brokers or dealers engaged by the Selling Stockholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from Selling Stockholders or from purchasers in amounts
to be negotiated immediately prior to the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 701 promulgated under the Securities Act may
be sold under Rule 144 or Rule 701 rather than pursuant to this Prospectus.
We may enter into customary agreements with the Selling Stockholders
concerning indemnification and the provision of information in connection with
the sale of the shares.
There is no assurance that any of the Selling Stockholders will offer
for sale or sell any or all the common stock covered by this prospectus.
The stockholders listed above under "Selling Stockholders," and any
other person with whom such Selling Stockholder is acting in concert for the
purpose of selling securities of MDI, may not sell by means of the prospectus
more than the amount of securities, during any three-month period, specified in
Rule 144(e) promulgated under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered has
been passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
of New York, New York. Mintz Levin beneficially owns [175,000] shares of MDI
common stock.
EXPERTS
The financial statements incorporated by reference in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said report.
15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we filed with the SEC are incorporated
herein by reference:
(a) Transition Report on Form 10-KSB and 10-KSB/A for the seven months ended
December 31, 2001.
(b) Quarterly Report on Form 10-QSB for the quarter ended March 31, 2001.
(c) Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001.
(d) Quarterly Report on Form 10-QSB for the quarter ended September 30,
2001.
(e) Current Report on Form 8-K filed May 1, 2001.
(f) Current Report on Form 8-K filed May 2, 2001.
(g) Current Report on Form 8-K filed July 16, 2001.
(h) Current Report on Form 8-K filed July 24, 2001.
(i) Current Report on Form 8-K filed July 31, 2001.
(j) Current Report on Form 8-K filed on August 8, 2001.
(k) Current Report on Form 8-K filed on August 23, 2001.
(l) The description of Common Stock contained in the Company's Registration
Statement on Form 10-SB (File No. 000-24919) filed with the SEC on
September 28, 1998, as amended on February 1, 1999.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
after 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 deemed 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 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.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and include statements made in
press releases and oral statements made by our officers, directors or employees
acting on our behalf. All such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
market demand for our products, successful implementation of our products,
competitive factors, the ability to manage our growth, the ability to recruit
additional personnel and other factors referenced in this prospectus and in our
filings with the Securities and Exchange Commission. In addition to statements
which explicitly describe such risks and uncertainties, you are urged to
consider statements labeled with the terms "believes," "belief," "expects,"
"plans," "anticipates" or "intends," to be uncertain and forward-looking.
16
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
--------------------------------------------------------
The following documents filed by the Registrant with the Commission are
incorporated herein by reference:
(a) Transition Report on Form 10-KSB and 10-KSB/A for the seven
months ended December 31, 2001.
(b) Quarterly Report on Form 10-QSB for the quarter ended March 31,
2001.
(c) Quarterly Report on Form 10-QSB for the quarter ended June 30,
2001.
(d) Quarterly Report on Form 10-QSB for the quarter ended September
30, 2001.
(e) Current Report on Form 8-K filed May 1, 2001.
(f) Current Report on Form 8-K filed May 2, 2001.
(g) Current Report on Form 8-K filed July 16, 2001.
(h) Current Report on Form 8-K filed July 24, 2001.
(i) Current Report on Form 8-K filed July 31, 2001.
(j) Current Report on Form 8-K filed on August 8, 2001.
(k) Current Report on Form 8-K filed on August 23, 2001.
(l) The description of Common Stock contained in the Company's
Registration Statement on Form 10-SB (File No. 000-24919) filed
with the SEC on September 28, 1998, as amended on February 1,
1999.
All reports and other documents filed by the Registrant after the date
hereof pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934 prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be part hereof from the date of filing of such reports
and documents.
II-1
Item 4. Description of Securities.
----------------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
-----------------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers.
--------------------------------------------------
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation, or an amendment
thereto validly approved by stockholders, to eliminate or limit personal
liability of members of its Board of Directors for violations of a director's
fiduciary duty of care. However, the elimination or limitation shall not apply
where there has been a breach of the duty of loyalty, failure to act in good
faith, intentional misconduct or a knowing violation of a law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal or an
improper personal benefit is obtained. Delaware General Corporation Law, Section
145, permits a corporation organized under Delaware law to indemnify directors
and officers with respect to any matter in which a director or officer acted in
good faith and in a manner reasonably believed to be not opposed to the best
interests of the corporation, and, with respect to any criminal action, had
reasonable cause to believe the conduct was lawful.
Our Certificate of Incorporation includes the following language:
SEVENTH:
Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach
of fiduciary duties unless the breach involves: (1) a director's
duty of loyalty to the corporation or its stockholders; (2) acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (3) liability for unlawful payment
of dividends or unlawful stock purchases or redemption by the
corporation; or (4) a transaction from which the director derived
an improper personal benefit.
EIGHTH:
1. To the extent permitted by Delaware law from time to time in
effect and subject to the provisions of paragraph (2) of this
Article, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigation (other than an action by
or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
II-2
2. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
3. To the extent that a present and former director or officer of
the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraphs
(1) and (2) of this Article, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
4. Any indemnification under paragraphs (1) and (2) of this Article
(unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in said paragraphs (1)
and (2). Such determination shall be made, with respect to a person
who is a director or officer at the time of such determination, (i)
by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii)
by a committee of such directors designated by majority vote of
such directors, even though less than a quorum, or (iii) if there
are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iv) by the
stockholders.
5. Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses
(including attorneys' fees) incurred by former directors and
officers or other employees and agents shall be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate.
6. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Article shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses shall be entitled under
any by-law, agreement, vote of the stockholders or disinterested
directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
II-3
7. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against
such liability under the provisions of the Delaware General
Corporation Law.
8. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
9. Each person who serves as a director, officer, employee or agent
of the Corporation or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise while this
Article EIGHTH is in effect shall be deemed to be doing so in
reliance on the provisions of this Article EIGHTH, and neither the
amendment or repeal of this Article EIGHTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with
this Article EIGHTH, shall apply to or have any effect on the
indemnification of such director, officer, employee or agent
occurring prior to such amendment, repeal, or adoption of an
inconsistent provision.
MDI has a liability insurance policy in effect for officers and directors. Such
insurance, in certain instances, insures our directors and officers against
liabilities arising under the Securities Act, including liabilities arising out
of the offering made by this registration statement.
Item 7. Exemption from Registration Claimed.
--------------------------------------------
The previously issued securities being registered for reoffer and resale
pursuant to the prospectus filed as part of this Registration Statement were
issued by the registrant without registration in reliance upon the exemption
provided by Section 4(2) of the Securities Act of 1933, since no public offering
was involved. No underwriters were involved in the foregoing sales of
securities. In addition, each of the recipients of such restricted securities
has represented that he or she understands that such shares may not be sold or
otherwise transferred absent a registration statement under the Securities Act
of 1933 or an exemption therefrom, and each certificate representing such shares
of the registrant's common stock bears a restrictive legend to such effect.
Item 8. Exhibits.
-----------------
(4.1) Certificate of Incorporation of MDI Entertainment, Inc. (f/k/a
Puff Process, Inc.) dated December 29, 1994, as amended. (1)
(4.2) Certificate of Amendment to the Certificate of Incorporation of
MDI Entertainment, Inc. dated February 28, 1999. (2)
(4.3) Amended and Restated By-Laws of MDI Entertainment, Inc., dated
April 27, 1999 (3)
(4.4) MDI Entertainment, Inc. 1998 Stock Option and Award Plan, as
amended. (4)
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
as to the legality of shares being registered. (5)
II-4
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in opinion of counsel filed as Exhibit 5).
(23.2) Consent of Arthur Andersen LLP (5)
(24.1) Power of Attorney to file future amendments (set forth on the
signature page of this Registration Statement.)
-------------------------------------------
(1) Incorporated by reference from MDI's Amendment No. 1 to Form
10-SB filed February 1, 1999.
(2) Incorporated by reference from MDI's Form 10-QSB for the period
ended February 28, 1999 (filed April 14, 1999).
(3) Incorporated by reference from MDI's Form 10-KSB for the period
ended May 31, 1999 (filed August 27, 1999).
(4) Incorporated by reference from MDI's Form 10-SB, filed September
28, 1998, and as amended by MDI's Definitive Proxy Statement on
Schedule 14A filed May 1, 2001.
(5) Filed herewith.
Item 9. Undertakings.
---------------------
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represents 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;
II-5
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes 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 this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) 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 foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the 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-6
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-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hartford, Connecticut on December 28, 2001.
MDI ENTERTAINMENT, INC.
By /s/ Steven M. Saferin
-----------------------------------
Steven M. Saferin
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Steven M. Saferin and Kenneth M. Przysiecki, or either of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution in each of them, for him and in his name, place and stead, and in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-8 of MDI Entertainment,
Inc., and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
or about the premises, as full to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes may lawfully
do or cause to be done by virtue 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 dates indicated.
Signature Title Date
--------- ----- ----
/s/ Steven M. Saferin President and Chief Executive Officer October 24, 2001
--------------------------- (principal executive officer and Director)
Steven M. Saferin
/s/ Kenneth M. Przysiecki Senior Vice President of Accounting October 24, 2001
--------------------------- and Administration
Kenneth M. Przysiecki (principal financial and accounting officer and Director)
/s/ Robert J. Wussler Director October 24, 2001
---------------------------
Robert J. Wussler
/s/ S. David Fineman Director October 29, 2001
---------------------------
S. David Fineman
/s/ Todd Leavitt Director October 25, 2001
---------------------------
Todd Leavitt
/s/ William G. Malloy Director October 31, 2001
---------------------------
William G. Malloy
MDI ENTERTAINMENT, INC.
INDEX TO EXHIBITS FILED WITH
FORM S-8 REGISTRATION STATEMENT
Exhibit No. Exhibit
(4.1) Certificate of Incorporation of MDI Entertainment, Inc. (f/k/a Puff
Process, Inc.) dated December 29, 1994, as amended. (1)
(4.2) Certificate of Amendment to the Certificate of Incorporation of MDI
Entertainment, Inc. dated February 28, 1999. (2)
(4.3) Amended and Restated By-Laws of MDI Entertainment, Inc., dated April 27,
1999 (3)
(4.4) MDI Entertainment, Inc. 1998 Stock Option and Award Plan, as amended.(4)
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as to the
legality of shares being registered. (5)
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (included
in opinion of counsel filed as Exhibit 5).
(23.2) Consent of Arthur Andersen LLP (5)
(24.1) Power of Attorney to file future amendments (set forth on the signature
page of this Registration Statement.)
-------------------------------------------
(1) Incorporated by reference from MDI's Amendment No. 1 to Form 10-SB filed
February 1, 1999.
(2) Incorporated by reference from MDI's Form 10-QSB for the period ended
February 28, 1999 (filed April 14, 1999).
(3) Incorporated by reference from MDI's Form 10-KSB for the period ended
May 31, 1999 (filed August 27, 1999).
(4) Incorporated by reference from MDI's Form 10-SB, filed September 28,
1998, and as amended by MDI's Definitive Proxy Statement on Schedule 14A
filed May 1, 2001.
(5) Filed herewith.