-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LkdYnoCC5l0HaclNdfvxmraYG2Egd1JKcz/s0YyJb/0pqWmq7X7t0mLSotk9fJCb chZrB+/QYvrYlfBgj9FSFA== 0000890163-99-000411.txt : 19991123 0000890163-99-000411.hdr.sgml : 19991123 ACCESSION NUMBER: 0000890163-99-000411 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19991122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW FRONTIER MEDIA INC /CO/ CENTRAL INDEX KEY: 0000847383 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 841084061 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 424B1 SEC ACT: SEC FILE NUMBER: 333-90803 FILM NUMBER: 99762035 BUSINESS ADDRESS: STREET 1: 5435 AIRPORT BLVD STREET 2: SUITE 100 CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3034440632 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL SECURITIES HOLDING CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STRATEGIC ACQUISITIONS INC DATE OF NAME CHANGE: 19600201 424B1 1 FORM 424 PROSPECTUS NEW FRONTIER MEDIA, INC. 2,059,180 SHARES OF COMMON STOCK ------------------------ The 2,059,180 shares of common stock are being offered by the selling stockholders. The common stock currently trades on the NASDAQ SmallCap Market under the symbol "NOOF". On November 9, 1999, the last sale price of the common stock as reported on NASDAQ was $4.75 per share. The common stock may be sold by the selling stockholders directly or through underwriters, dealers or agents in market transactions or privately negotiated transactions. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 IN THIS PROSPECTUS. The date of this prospectus is November 19, 1999 [This page intentionally left blank] 2 PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. It is not complete and may not contain all of the information that is important to you. To understand this offering fully, you should read the entire prospectus carefully, including the risk factors and financial statements. NEW FRONTIER MEDIA, INC. Offices: 5435 Airport Blvd, Suite 100, Boulder, Colorado 80301 Telephone number (303) 444-0900 Facsimile number (303) 444-0734 THE OFFERING Common Stock Offered by Selling Stockholders................................. 2,059,180 shares Common Stock to be Offered by Us............. 0 shares Common Stock Outstanding Before Offering (1)............................... 19,697,698 shares Common Stock Outstanding After Offering...... 21,756,878 shares based on all shares offered under this prospectus. Use of Proceeds.............................. All of the shares offered by this prospectus are being offered by the selling stockholders. New Frontier Media will not receive any proceeds from these sales of its stock.
- ------------------ (1) Based on shares outstanding as of November 11, 1999. RISK FACTORS This prospectus and the documents incorporated in this prospectus by reference may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are based on current expectations, estimates and projections about our industry, management's beliefs and assumptions made by management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Accordingly, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include those risk factors and such other uncertainties noted in the prospectus and in the documents incorporated herein by reference. New Frontier assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. LIMITS ON OUR ACCESS TO DISTRIBUTION CHANNELS COULD CAUSE US TO LOSE SUBSCRIBER REVENUES AND ADVERSELY AFFECT OUR OPERATING PERFORMANCE. Our satellite uplink providers' services are critical to us. If our satellite uplink providers fail to provide the services contracted for with them, our satellite programming operations would in all likelihood be suspended, resulting in a loss of substantial revenues to the Company. If our satellite uplink providers improperly manage their uplink facilities, we could experience signal disruptions and other quality problems that, if not immediately addressed, could cause us to lose subscribers and subscriber revenues. Our continued access to satellite transponders is critical to us. Our satellite programming operations require continued access to satellite transponders to transmit programming to our subscribers. We also 3 use satellite transponders to transmit programming to cable operators. Material limitations to satellite transponder capacity could materially adversely affect our operating performance. Access to transponders may be restricted or denied if: * we or the satellite owner is indicted or otherwise charged as a defendant in a criminal proceeding; * the FCC issues an order initiating a proceeding to revoke the satellite owner's authorization to operate the satellite; * the satellite owner is ordered by a court or governmental authority to deny us access to the transponder; * we are deemed by a governmental authority to have violated any obscenity law; or * our satellite transponder provider determines that the content of our programming is harmful to its name or business. In addition to the above, the access of our networks to transponders may be restricted or denied if a governmental authority commences an investigation concerning the content of the transmissions. Our ability to convince cable operators to carry our programming is critical to us. The primary way for us to expand our cable subscriber base is to convince additional cable operators to carry our programming. We can give no assurance, however, that our efforts to increase our base of cable subscribers will be successful. WE HAVE BEEN SUED BY A PROSPECTIVE INVESTOR SEEKING TO ENFORCE AN ALLEGED AGREEMENT TO CONVEY A 70% EQUITY INTEREST IN NEW FRONTIER MEDIA AND IF WE DO NOT PREVAIL IN THIS LAWSUIT WE COULD SUFFER A MATERIAL FINANCIAL LOSS. In a January 25, 1999 amended complaint in District Court in Boulder, Colorado, (Case No. 99CV30), J.P. Lipson seeks to enforce an alleged agreement by New Frontier Media to convey to Lipson a 70% equity interest in New Frontier Media. Lipson is also seeking $10 million in liquidated damages and/or unspecified damages. If we do not prevail in this lawsuit, we could suffer a material financial loss which loss, if any, can not be estimated. We dispute that there exists a binding and enforceable agreement to transfer any equity interest in New Frontier Media to Lipson and filed on February 10, 1999 a motion for partial summary judgement directed to this issue. To date the Court has neither ruled on nor set our motion for a hearing. We will continue to vigorously defend against Lipson's claims. IN THE EVENT OUR SHARES OF COMMON STOCK WERE TO BE DELISTED FROM THE NASDAQ SMALLCAP MARKET, OUR LIQUIDITY AND CAPITAL RESOURCES WOULD BE MATERIALLY AND ADVERSELY AFFECTED AS OUR FUTURE ACCESS TO THE CAPITAL MARKETS WOULD BE SIGNIFICANTLY IMPAIRED. By letter dated August 20, 1999, New Frontier Media has been informed that the Nasdaq Listing and Hearing and Review Council has called for review of the Nasdaq Listing Qualifications Panel's decision of July 7, 1999 to continue the listing of the shares of New Frontier Media's common stock on the Nasdaq SmallCap Market, to determine "whether the Panel's decision was appropriate given that the Panel found that New Frontier Media had twice violated the shareholder approval requirement and that New Frontier Media had not remedied the violations." While New Frontier Media has urged the Council to affirm the Panel's determination to continue the listing of its shares, there can be no assurance as to what action the Council will decide to take. In the event New Frontier Media's shares of common stock were to be delisted from the Nasdaq SmallCap Market, New Frontier Media's liquidity and capital resources would be materially and adversely affected as New Frontier Media's future access to the capital markets would be significantly impaired. In addition, upon any such delisting, the holder of New Frontier Media's 7% Series C convertible preferred stock would have the right to require the redemption of its $6 million investment in New Frontier Media. 4 The two transactions at issue involved the issuance and sale of securities authorized by the Board of Directors at prices less than market value and each exceeding 20% of the outstanding shares prior to the issuance and sale. The two transactions were approved by the Board of Directors and did not require shareholder approval under Colorado law. At the time of the transactions, in view of the time constraints then involved, New Frontier Media determined to follow an informal procedure recommended by special Nasdaq counsel of obtaining documentation from a relatively few large shareholders that these holders of a majority of its outstanding shares would have approved the two transactions if their proxies had been solicited. The Nasdaq staff subsequently objected to the use of this informal procedure indicating, among other things, that New Frontier Media should have given prior notice of its use of the procedure to New Frontier Media's stockholders. On October 5, 1999, New Frontier Media made a written submission urging the Council to affirm the Panel's determination to continue the listing of New Frontier Media's shares. On October 27, 1999, in excess of 90 percent of the shares represented in person or by proxy at New Frontier Media's Annual Meeting of Shareholders were voted in favor of the ratification of the two transactions at issue. In a further effort to demonstrate New Frontier Media's commitment to future compliance with applicable Nasdaq listing requirements, New Frontier Media's Board of Directors has formed a special committee of its independent directors, called the Nasdaq Compliance Committee. This Committee will review all future corporate transactions to assure their compliance with Nasdaq listing requirements. For assistance in this regard, the Committee has retained Harvey L. Pitt, former General Counsel of the Securities and Exchange Commission, and now a partner at the law firm of Fried, Frank, Harris, Shriver & Jacobson in Washington, D.C. In addition, New Frontier Media has resolved to consult with the staff of the Nasdaq Stock Market, Inc. in the event that New Frontier Media proposes to act contrary to the advice of the Special Committee's legal counsel on any of these matters. IN THE EVENT OUR SHARES OF COMMON STOCK WERE TO BE DELISTED FROM THE NASDAQ SMALLCAP MARKET, AND OUR SHARES WERE TO BECOME SUBJECT TO THE RULES ON PENNY STOCKS, THE MARKET LIQUIDITY FOR THE COMPANY'S SECURITIES COULD BE SEVERELY ADVERSELY AFFECTED. In the event our shares of common stock were to be delisted from the Nasdaq SmallCap Market, and our shares were to become subject to the rules on penny stocks, the market liquidity for the Company's common stock could be severely adversely affected. There are a number of special disclosures and inquires which a broker or dealer must make before they can approve a person's account for transactions in penny stocks. As such, it is more difficult for a company whose securities are considered to be a penny stock to attract investors and market interest. Effective August 11, 1993, the Securities and Exchange Commission adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to New Frontier Media, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rule requires that a broker or dealer approve a person's account for transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, which, in highlighted form: sets forth the basis on which the broker or dealer made the suitability determination; and that the broker or dealer received a signed, written agreement from the investor 5 prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to the broker-dealer. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OUR PRIMARY COMPETITOR, WHO HAS SIGNIFICANTLY GREATER RESOURCES THAN US, WE WILL NOT BE ABLE TO INCREASE SUBSCRIBER REVENUES OR GENERATE PROFITS. Our ability to increase subscriber revenues and operate profitably, is directly related to our ability to compete effectively with Playboy, our principal competitor. Playboy has significantly greater financial, sales, marketing and other resources to devote to the development, promotion and sale of its cable programming products, as well as a longer operating history and broader name recognition, than we do. We compete with Playboy as to the editing standards of its programming, network performance in terms of subscriber buy rates and the license fees that we offer to cable and DBS system providers. IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OTHER FORMS OF ADULT AND NON-ADULT ENTERTAINMENT, WE WILL ALSO NOT BE ABLE TO INCREASE SUBSCRIBER REVENUES OR GENERATE PROFITS. Our ability to increase subscriber revenues and operate profitably, is also related to our ability to compete effectively with other forms of adult and non-adult entertainment. We face competition in the adult entertainment industry from other providers of adult programming, adult video rentals and sales, newspapers and magazines aimed at adult consumers, adult oriented telephone chat lines, and adult oriented Internet services. To a lesser extent, we also face general competition from other forms of non-adult entertainment, including sporting and cultural events, other television networks, feature films and other programming. IF WE ARE NOT ABLE TO RETAIN OUR KEY EXECUTIVES IT WILL BE MORE DIFFICULT FOR US TO MANAGE OUR OPERATIONS AND OUR OPERATING PERFORMANCE COULD BE ADVERSELY AFFECTED. As a small company with approximately 150 employees, our success depends upon the contributions of our executive officers and our other key technical personnel. The loss of the services of any of our executive officers or other key personnel could have a significant adverse effect on our business and operating results. We cannot assure that New Frontier Media will be successful in attracting and retaining these personnel. It may also be more difficult for us to attract and recruit new personnel due to the adult nature of our business. OUR INABILITY TO IDENTIFY, FUND THE INVESTMENT IN, AND COMMERCIALLY EXPLOIT NEW TECHNOLOGY COULD HAVE AN ADVERSE IMPACT ON OUR FINANCIAL CONDITION. We are engaged in a business that has experienced tremendous technological change over the past two years. As a result, we face all the risks inherent in businesses that are subject to rapid technological advancement, such as the possibility that a technology that we have invested in may become obsolete. In that event, we may be required to invest in new technology. Our inability to identify, fund the investment in, and commercially exploit such new technology could have an adverse impact on our financial condition. Our ability to implement our business plan and to achieve the results projected by management will be dependent upon management's ability to predict technological advances and implement strategies to take advantage of such changes. GOVERNMENT REGULATION OF CABLE SYSTEM OPERATORS COULD MAKE IT MORE DIFFICULT FOR THEM TO BROADCAST OUR PROGRAMMING AND ADVERSELY AFFECT OUR OPERATING PERFORMANCE. Cable system operators could become subject to new governmental regulations which could further restrict their ability to broadcast our programming. If new regulations make it more difficult for cable operators to broadcast our programming our operating performance would be adversely affected. It is not possible for us to predict what new governmental regulations we may be subject to in the future. 6 Cable system operators have been subject to Section 505 of the Telecommunications Act of 1996 since May 18, 1997. We began offering adult programming for cable system operators in February 1998. We have never had the opportunity, or prior history, of selling our programming under any other regulatory structure. It is difficult to estimate what effect this Act has had on our potential business and potential subscribers. Section 505 of the Telecommunications Act effectively requires each cable system that offers adult programming either to: * install additional blocking technology in each household to prevent any momentary fragments of our content from accidentally becoming available to non-subscribing cable customers or * restrict the period during which adult programming is transmitted to the hours between 10:00 p.m. and 6:00 a.m. Although a United States District Court has unanimously declared this law unconstitutional and blocked its implementation, the decision has been appealed and accepted for review by the U.S. Supreme Court. It has been our experience that most cable system operators are continuing to restrict the broadcast of adult programming to the hours of 10:00 p.m. to 6:00 a.m. and are unwilling to rely on the District Court's decision until the U.S. Supreme Court issues its ruling on the constitutionality of Section 505 of the Act. NEGATIVE PUBLICITY, LAWSUITS OR BOYCOTTS BY OPPONENTS OF ADULT CONTENT COULD ADVERSELY AFFECT OUR OPERATING PERFORMANCE AND DISCOURAGE INVESTORS FROM INVESTING IN OUR PUBLICLY TRADED SECURITIES. We could become a target of negative publicity, lawsuits or boycotts by one or more advocacy groups who oppose the distribution of "adult entertainment." These groups have mounted negative publicity campaigns, filed lawsuits and encouraged boycotts against companies whose businesses involve adult entertainment. The costs of defending against any such negative publicity, lawsuits or boycotts could be significant, could hurt our finances and could discourage investors from investing in our publicly traded securities. To date, we have not been a target of any of these advocacy groups. As a leading provider of adult entertainment, we can not assure you that we may not become a target in the future. BECAUSE WE ARE INVOLVED IN THE ADULT PROGRAMMING BUSINESS, IT MAY BE MORE DIFFICULT FOR US TO RAISE MONEY OR ATTRACT MARKET SUPPORT FOR OUR STOCK. Some investors, investment banking entities, market makers, lenders and others in the investment community may decide not to provide financing to us, or to participate in our public market or other activities due to the nature of our business, which, in turn, may hurt the value of our stock, and our ability to attract market support. BECAUSE IT MAY BE DIFFICULT TO EFFECT A CHANGE IN CONTROL OF NEW FRONTIER MEDIA WITHOUT CURRENT MANAGEMENT'S CONSENT, A POTENTIAL SUITOR WHO OTHERWISE MIGHT BE WILLING TO PAY A PREMIUM FOR ACQUIRING OUR COMPANY MAY DECIDE NOT TO ATTEMPT AN ACQUISITION OF NEW FRONTIER MEDIA. Issuance of a poison-pill or a large block of preferred stock with voting rights could have the effect of delaying, deferring or preventing a change in control of New Frontier Media. Potential suitors who otherwise might be willing to pay a premium to acquire New Frontier Media may decide not to try to acquire us because it may be difficult to effect a change in control of New Frontier Media without current management's consent. New Frontier Media's board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of such stock without further shareholder approval. The rights of the holders of common stock will be subjected to, and may also be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. 7 FUTURE SALES OF COMMON STOCK MAY CAUSE THE MARKET PRICE OF THE COMMON STOCK TO DROP. Future sales of shares of common stock by New Frontier Media and/or its stockholders could cause the market price of the common stock to drop. There are currently 11,877,433 restricted shares and 7,802,265 shares of common stock which are freely tradable or eligible to have the restrictive legend removed pursuant to Rule 144(k) promulgated under the Securities Act. Of the restricted shares, 1,988,800 of such shares are currently eligible for resale under Rule 144. Sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could have a significant adverse effect on the market price of the common stock. THE YEAR 2000 PROBLEM COULD CAUSE US TO SUFFER BUSINESS INTERRUPTIONS, OR SHUTDOWN, REPUTATIONAL HARM OR LEGAL LIABILITY, AND AS A RESULT, MATERIAL FINANCIAL LOSS. We recognize that we, like all other businesses, are at risk if key suppliers in utilities, communications, transportation, banking and government are not ready for the year 2000. We also are at risk if the cable or DBS operators with whom we do business are not ready for the year 2000. It is also possible that our computer software applications, internal accounting, customer billing and other business systems, working either alone or in conjunction with those of third parties who do business with us, will not accept input of, store, manipulate and output dates in the year 2000 or after without error. If any of this were to happen, we may suffer business interruptions or shutdown, reputational harm or legal liability and, as a result, material financial loss. SHAREHOLDERS MAY NOT BE ABLE TO RE-SELL THEIR STOCK OR MAY HAVE TO SELL AT PRICES SUBSTANTIALLY LOWER THAN THE PRICE THEY PAID FOR IT. The trading price for the common stock has been highly volatile and could continue to be subject to significant fluctuations in response to variations in our quarterly operating results, general conditions in the adult entertainment industry or the general economy, and other factors. In addition, the stock market is subject to price and volume fluctuations affecting the market price for public companies generally, or within broad industry groups, which fluctuations may be unrelated to the operating results or other circumstances of a particular company. Such fluctuations may adversely affect the liquidity of the common stock, as well as the price that holders may achieve for their shares upon any future sale. INDEMNIFICATION Our Bylaws require us, to the fullest extent permitted or required by Colorado law, to: * indemnify our directors against any and all liabilities and * advance any and all reasonable expenses incurred in any proceeding to which any such director is a party or in which such director is deposed or called to testify as a witness because he or she is or was a director of New Frontier Media. Generally, Colorado statutory law permits indemnification of a director upon a determination that he or she acted in good faith and in a manner he or she 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 or her conduct was unlawful. The right to indemnification granted in our Bylaws is not exclusive of any other rights to indemnification against liabilities or the advancement of expenses which a director may be entitled to under any written agreement, Board resolution, vote of stockholders, Colorado law or otherwise. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant under 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. 8 WHERE YOU CAN GET MORE INFORMATION At your request, we will provide you, without charge, a copy of any exhibits to our registration statement incorporated by reference in this prospectus. If you want more information, write or call us at: New Frontier Media, Inc. 5435 Airport Blvd, Suite 100 Boulder, Colorado 80301 Telephone number: (303) 444-0900 Toll Free number: 1-888-875-0632 Facsimile number: (303) 444-0734 Our fiscal year ends on March 31. We furnish our shareholders annual reports containing audited financial statements and other appropriate reports. In addition, we are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information we file at the SEC's public reference room in Washington D.C. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public on the SEC Internet site at http:\\www.sec.gov. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to these documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, which we have already filed with the SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling stockholders sell all of the securities offered by this prospectus. New Frontier Sec Filings (File No. 0-23697) * Annual Report on Form 10-KSB/A for the year ended March 31, 1999 * All other reports and other documents filed by us pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 since March 31, 1999 * Our registration statement on Form 8-A12G filed on January 30, 1998 registering the common stock under Section 12(g) of the Securities Exchange Act of 1934 This prospectus is part of a registration statement we filed with the SEC. You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or the documents incorporated by reference is accurate as of any date other than the date on the front of this prospectus or those documents. REGISTRATION RIGHTS In connection with our private placement of 600 shares of 7% Series C convertible preferred stock, we are obligated to use our best efforts to cause this registration statement to become effective by February 11, 2000. We are further obligated to register and qualify the registerable shares under such state securities laws as the selling stockholders may reasonably request. We will bear the reasonable expenses of the registration and qualification of the shares under the Securities Act and state securities laws other than any underwriting discounts and commissions and the expenses of counsel for the selling stockholders. If the registration statement is not effective by April 11, 2000, then JNC Opportunity Fund Ltd. has the right to require New Frontier Media to redeem all or a portion of the preferred stock then held by them. 9 USE OF PROCEEDS FROM SALE OF COMMON STOCK Proceeds from the sale of the shares of common stock being registered hereby will be received directly by the selling stockholders. Accordingly, we will not receive any proceeds from the sale of the shares. SELLING STOCKHOLDERS The selling stockholders whose shares of common stock are being registered hereunder are: JNC Opportunity Fund Ltd., Doug Moreland, Columbine Financial Solutions, Inc., Kent Krausman, Robert Seefeld and Michael Seeley. No selling stockholder has any affiliation with New Frontier Media or its officers, directors, promoters or principal shareholders. JNC Opportunity Fund Ltd. purchased an aggregate of 600 shares of our 7% Series C Convertible Preferred Stock and a warrant to purchase 360,000 shares of our common stock for an aggregate purchase price of $6 million in a private placement transaction which closed effective September 30, 1999. The preferred stock may be converted into shares of our common stock. Holders of the preferred stock and the warrant are prohibited from converting or exercising into and acquiring shares of our common stock to the extent that such conversion or exercise would result in such holder, together with any affiliate thereof, beneficially owning in excess of 4.999% of the outstanding shares of our common stock following such conversion or exercise. This restriction may be waived by the holder as to itself on not less than 61 days' notice to us. Since the number of shares of our common stock that will be issuable upon conversion of the preferred stock will, on April 11, 2000 and each three month anniversary thereof, change based upon fluctuations of the market price of shares of our common stock prior to a conversion, the actual number of shares of our common stock that will be issuable upon conversion of the preferred stock cannot be determined at this time. Because of this fluctuating characteristic, we have agreed to register a number of shares of our common stock that exceeds the number of our shares of common stock currently beneficially owned by JNC. The number of shares of our common stock listed in the table below as currently being beneficially owned by JNC includes the shares of our common stock that are issuable to it, subject to the 4.999% limitation, upon conversion of the preferred stock and exercise of the warrant. However, the 4.999% limitation would not prevent JNC from acquiring and selling in excess of 4.999% of shares of our common stock through a series of conversions and sales under the preferred stock and exercises and sales under the warrant while never beneficially owning more than 4.999% at any one time. New Frontier has agreed to register the public offering of the selling stockholders' shares of common stock under the Securities Act and to pay all expenses in connection with such registration, other than brokerage commissions and discounts in connection with the sale of the common stock and the expenses of counsel. The following table sets forth the names of the selling stockholders, the number of shares of common stock owned beneficially by each of the selling stockholders as of November 12, 1999, the number of shares which may be offered for resale pursuant to this prospectus and the number of shares of common stock owned beneficially by each of the selling stockholders after the offering. The information included below is based upon information provided by the selling stockholders. Because the selling stockholders may offer all, some or none of their common stock, no definitive estimate as to the number of shares that will be held by the selling stockholders after such offering can be provided and the following table has been prepared on the assumption that all shares of common stock offered under this prospectus will be sold. 10
SHARES OF SHARES OF COMMON STOCK SHARES OF COMMON STOCK BENEFICIALLY COMMON BENEFICIALLY OWNED PRIOR TO STOCK BEING OWNED AFTER NAME OF SELLING STOCKHOLDER OFFERING(1) OFFERED OFFERING(2) - ---------------------------------------------- -------------- -------------- -------------- JNC Opportunity Fund Ltd...................... 1,036,502 1,694,180 0 Doug Moreland................................. 100,000 100,000 0 Columbine Financial........................... 100,000 100,000 0 Kent Krausman................................. 75,000 75,000 0 Robert Seefeld................................ 50,000 50,000 0 Michael Seeley................................ 40,000 40,000 0
- ------------------ (1) Beneficial ownership is calculated in accordance with Rule 13d-3(d) under the Exchange Act except with respect to JNC Opportunity Fund's beneficial ownership, which is subject to the 4.999% limitation described above. (2) Assumes the sale of all shares offered by this prospectus. PLAN OF DISTRIBUTION The selling stockholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares: * ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; * block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; * purchases by a broker-dealer as principal and resale by the broker-dealer for its account; * an exchange distribution in accordance with the rules of the applicable exchange; * privately negotiated transactions; * short sales, except as described below; * broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; * a combination of any such methods of sale; and * any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in securities of New Frontier Media or derivatives of New Frontier Media securities and may sell or deliver shares in connection with these trades; provided that the holders of the 7% Series C convertible preferred stock may not enter into any "Short Sales" during the applicable conversion price reset periods for the preferred stock. The selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. Brokers-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such 11 sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. New Frontier Media is required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholders. New Frontier Media has agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. DIVIDEND POLICY We have not paid any cash or other dividends on our common stock since our inception and do not anticipate paying any such dividends in the foreseeable future. We intend to retain any earnings for use in our operations and to finance the expansion of its business. LEGAL MATTERS The legality of the Shares offered hereby has been passed upon for us by Thorburn, Sakol & Throne of Denver, Colorado. EXPERTS The financial statements of New Frontier Media as of March 31, 1999 and 1998 and for the years ended March 31, 1999 and 1998, incorporated by reference in this prospectus from the Annual Report, have been incorporated herein in reliance on the report of Spicer, Jeffries & Co., independent certified public accountants, given on the authority of said firm as experts in accounting and auditing. 12 TABLE OF CONTENTS PAGE ---- Prospectus Summary......................................... 3 The Offering............................................... 3 Risk Factors............................................... 3 Indemnification............................................ 8 Where You Can Get More Information......................... 9 Registration Rights........................................ 9 Use of Proceeds from Sale of Common Stock.................. 10 Selling Stockholders....................................... 10 Plan of Distribution....................................... 11 Dividend Policy............................................ 12 Legal Matters.............................................. 12 Experts.................................................... 12 -----END PRIVACY-ENHANCED MESSAGE-----