INTRODUCTION
This Information Statement is furnished by the Board of Directors of Magellan Filmed Entertainment, Inc ("Magellan" or the "Company") to the shareholders of record of the Company's common stock at the close of business on July 24, 2001 (the "Meeting Record Date"), and is being sent to you in connection with the annual meeting of shareholders of Magellan to be held at the Bellevue Club, 11200 SE 6th, Bellevue, WA 98004 on August 23, 2001, at 10:00
a.m. PDT, (the "Meeting"). The purpose of the Meeting is to consider and take action on the proposals summarized below:
(i) Increase in authorized Capital An amendment to the Company's Articles of Incorporation (the "Articles") to increase the number of shares of common stock, (the "Common Stock"), authorized for issuance from 200 million to 950 million; to increase the number of shares of preferred stock, (the "Preferred Stock"), authorized for issuance from 50 million to 300 million;
(ii) Change the par value An amendment to the Company's Articles of Incorporation to change the par value of the Common Stock from $.001 to $.0001 and to change the par value of the Preferred Stock from $.001 to $.0001;
(iii) Change in provisions for the issuance of capital stock. An amendment to the Company's Articles of Incorporation to provide that the Board of Directors have the authority to issue the Common Stock and Preferred Stock in a series and to determine for each series the voting powers, designations, preferences, rights, qualifications, limitations or restrictions expressed in the resolutions providing for the issue of such series, and to add provisions to the Articles of Incorporation to clarify features relating to the authorized capital stock;
(iv) Such other business as may properly come before the meeting.
The form of the Certificate of Amendment to the Articles of Incorporation of Magellan Filmed Entertainment, Inc. is included herewith as Exhibit A.
This Information Statement is being mailed on or before the close of business on August 3, 2001, to shareholders holding Common Stock, the only shareholders entitled to vote or give an authorization or consent in regard to any matter to be acted upon. The Company will cause each of the matters described above to become effective as soon as practicable twenty (20) days after August 3, 2001, the date the Information Statement is first sent to the stockholders. The effective date of the amendments described above will be the Meeting date, August 23, 2001.
OUTSTANDING SECURITIES AND VOTING RIGHTS
As of the Meeting Record Date, July 24, 2001, there were issued and outstanding 190,000,000 shares of Common Stock for the purpose of determining shareholders entitled to receive this Information Statement. The Common Stock is the only security of the Company that is issued and is entitled to vote on these matters. The Company's Bylaws provide that shareholders holding 10% (ten percent) of the issued and outstanding voting shares, present at the Meeting or represented by proxy, shall constitute a quorum. When a quorum is present the vote of the holders of 10% (ten percent) of the stock having voting power present at the Meeting or represented by proxy shall be sufficient to decide any matter brought before such meeting
Each holder of Common Stock is entitled to one vote in person or by proxy for each share of Common Stock in his or her name on the books of the Company, for a total of 186,241,425 Common Stock votes as of the Meeting Record Date, July 24, 2001 The Common Stock shareholders are entitled to vote on any matter submitted to the vote of the shareholders at any meeting of the shareholders.
The Board of Directors of the Company believes that the proposals are in the best interest of the Magellan shareholders and recommends adoption of the proposals.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
ADDITIONAL INFORMATION
REASONS FOR THE CHANGES
The Company currently has 200 million shares of $.001 par value Common Stock and 50 million shares of $.001 par value Preferred Stock authorized for issuance. The Company's Board of Directors recommended the increase in the authorized Common Stock from 200 million shares par value $.001 to 950 million shares par value $.0001, and the authorized Preferred Stock from 50 million shares, par value $.001 to 300 million shares, par value $.0001 to make available for issuance from time to time additional capital stock in connection with financings, acquisitions and conversions. Because the market price for the common stock has remained relatively low, it has been necessary to sell or otherwise issue more shares than anticipated, in order to raise sufficient capital through the issuance of convertible debt instruments. The Board believes it necessary to increase the number of shares of Common Stock and Preferred Stock the Company is authorized to issue. The Board also recommends the change in the par value of the common Stock and Preferred Stock from $.001 to $.0001 to insure that the issuance of shares for conversion of convertible debentures are at prices that are at or above par value. Shares cannot be issued below par value since such shares would not be fully paid. The decrease in par value may also minimize state fees based on par value of authorized capital. The proposed changes will be affected by the filing of a Certificate of Amendment with the Secretary of State of the State of Nevada, included herein as Exhibit A. The changes will be effective as of the Meeting date, August 23, 2001.
The Company anticipates that in the future it will consider a number of financing and acquisition transactions which may involve the issuance of additional equity, debt or convertible securities. The increase in authorized capital stock and the provision giving the Board authority, without any further approval of the shareholders, to determine the terms of any class or series of Common Stock or Preferred Stock to be issued from time to time, including voting powers, designations, preferences, rights, qualifications, limitations, restrictions, dividends or interest rates, conversion prices, redemption prices, maturity dates and similar matters will allow the board to act without the necessity, and the related costs and delays, of either calling a special shareholders meeting or of waiting for the regularly scheduled annual meeting of shareholders in order to increase the authorized capital to the level proposed herein. If, in a particular instance, shareholder approval were required by law or otherwise deemed advisable by the Board, then the matter would be referred to shareholders for their approval, regardless of whether shareholders had previously approved a sufficient number of shares.
The Company currently anticipates the issuance of additional shares of Common Stock for conversion of outstanding convertible debentures of $777,100. This amount is convertible based on the dollars to be converted divided by the current Common Stock price at the time of conversion, adjusted for any conversion discounts. Future common stock prices are unknown, therefore the number of shares to be issued for such conversions is unknown, if however the Company were to issue a significant number of shares, such issuance would result in a dilution of the percentage ownership interest of existing shareholders.
CERTAIN ANTI-TAKEOVER EFFECTS OF THE AUTHORIZED STOCK INCREASE
Under certain circumstances, the Board of Directors could create impediments to, or delay persons seeking to effect, a takeover or transfer of control of the Company by causing some or all of the additional authorized shares to be issued to a holder or holders who side with the Board in opposing a takeover bid that the Board of Directors determines is not in the best interests of the Company and its shareholders. Such an issuance would diminish the voting power of existing shareholders who favor a change in control, and the ability to issue the shares could discourage an attempt to acquire control of the Company. While it may be deemed to have potential anti-takeover effects, the Board is proposing the increase in authorized capital stock solely for the purpose of poising itself for potential financings and acquisitions. The amendment is not prompted by any specific effort or takeover threat currently known or perceived by management.
NO DISSENTERS' RIGHTS OF APPRAISAL
Nevada Law does not provide for dissenters' rights of appraisal with respect to the increase in the number of authorized shares of Common Stock and Preferred Stock, the change in par value or the change granting the Board authority to determine the provisions of capital stock issued.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director, nominee for director, executive officer, associate of any director, nominee for director, executive officer or any other person has any substantial interest, direct or indirect, by security holdings or otherwise, in the proposed amendment to Magellan's Articles of Incorporation, which is not shared by all other stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of July 24, 2001 describing the beneficial ownership of Magellan's outstanding voting capital stock by (i) each of the Company's Officers and Directors; (ii) each person who is known by Magellan to own more than 5% of Magellan's outstanding common stock; and (iii) all of Magellan's Officers and Directors as a group
Title of Name of Beneficial Amount and Nature Percent
Class Owner of Beneficial Ownership of Class
---------- ------------------- ----------------------- --------
Common Patrick F Charles 14,812,500 (a)(c) 7.95%
Stock 8756-122nd Avenue NE
Kirkland, WA 98033
President, Chief Executive
Officer and Director
Common Terrence K. Picken 14,812,500 (b)(c) 7.95%
Stock 8756-122nd Avenue NE
Kirkland, WA 98033
Executive Vice President
Chief Operating Officer
And Director
Common James G. Brewer 3,375,000 1.81%
Stock 8756-122nd Avenue NE
Kirkland, WA 98033
Vice President Finance and
Chief Financial Officer
Stock All Officers and Directors 33,000,000 17.72%
as a group (3 persons)
(a) Includes 1,000,000 shares held by PDDE, LLC a State of Washington limited liability company formed in February 1998 of which Patrick F. Charles is Managing Member and owns controlling interest and 687,500 shares held by Coast Northwest Management, LLC a State of Washington Limited Liability Company formed in February 1998 of which Patrick F. Charles is a co-Managing Member and owns a 50% interest.
(b) Includes 625,000 shares held by United West Holdings LLC, a State of Washington limited liability company formed in February 1998 of which Terrence K. Picken is Managing Member and owns controlling interest, 375,000 shares held by TKY Holdings LLC, a State of Washington limited liability company formed in February 1998 of which Terrence K. Picken is Managing Member and owns controlling interest, and 687,500 shares held by Coast Northwest Management LLC, a State of Washington limited liability company formed in February 1998 of which Terrence K. Picken is a co-Managing Member and owns a 50% interest.
(c) Gives effect to the exercise of options to purchase shares of Common Stock:
for Mr. Charles, 250,000 shares at an average price of $0.40 per share and for Mr. Picken, 250,000 shares at an average price of $0.40 per share.
OTHER INFORMATION
Additional information concerning Magellan, including its annual report on Form 10-KSB, its quarterly reports on Form 10-QSB or its periodic reports on Form 8-K which have been filed with the Securities and Exchange Commission, may be accessed through the EDGAR archives, at www.sec.gov. Magellan's Common Stock trades on the Over The Counter Bulletin Board. The current trading symbol is MLFM.
