SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 22, 1999
BRILLIANT DIGITAL ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21637 95-4592204
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
6355 Topanga Canyon Boulevard, Suite 120
Woodland Hills, California 91367
(Address of Principal Executive Offices)
(818) 615-1500
(Registrant's Telephone Number)
<PAGE>
Item 5. OTHER EVENTS
GENERAL
We have entered into an agreement which gives us the right to acquire
1,700,000 common shares of Trojan Television Limited, a corporation formed under
the laws of England and Wales, which represents 85% of the 2,000,000 outstanding
common shares of Trojan. We intend to acquire the shares by exercising our right
to close a share purchase agreement with SF International Limited, Commtel
Services Ltd. and TB Investments LLC, the majority shareholders of Trojan.
Approximately 28 minority shareholders hold the remaining 300,000
outstanding common shares of Trojan. If we elect to close the share purchase
agreement, the majority shareholders have agreed to use their reasonable efforts
to cause each of the minority shareholders to become a party to the share
purchase agreement and sell their shares to us. If we close the share purchase
agreement, we intend to actively seek to acquire the remaining shares in Trojan
from the minority shareholders.
PURCHASE PRICE
If we close the share purchase agreement, we will issue shares of our
common stock to the Trojan shareholders in exchange for their Trojan shares. We
will issue, subject to certain adjustments discussed below:
o 0.33 shares of our common stock for each Trojan share, which
represents a total of 660,000 shares of our common stock if we
acquire 100% of the outstanding common shares of Trojan.
The total number of shares we will pay for Trojan will depend on the
number of minority shareholders who agree to become parties to the share
purchase agreement and sell their Trojan shares to us. At a minimum, and subject
to certain adjustments discussed below, we will issue to the majority
shareholders a total of 561,000 shares of common stock.
The share purchase agreement provides for an adjustment to the number of
shares we will be required to issue to the Trojan shareholders. If the amount of
Trojan's cash and cash equivalents is greater than the amount of Trojan's
actual, accrued and contingent liabilities, the number of shares to be issued to
the Trojan shareholders will be increased by a number determined by dividing:
o the amount of the difference; by
o 85% of the average closing price of a share of our common stock as
reported by the American Stock Exchange on the 15 trading days prior
to the closing date.
Page 2
<PAGE>
If the amount of Trojan's cash and cash equivalents is less than the amount of
Trojan's actual, accrued and contingent liabilities by more than $50,000, the
number of shares to be issued to the Trojan shareholders will be decreased by a
number determined by dividing:
o the amount of the difference; by
o the average closing price of a share of our common stock as reported
by the American Stock Exchange on the 15 trading days prior to the
closing date.
The purchase price for the Trojan shares will be paid within 5 business
days following final determination of Trojan's net asset value. Initially, the
shares will be deposited into an escrow account and will be subject to offset
for any claims we may make for indemnification under the share purchase
agreement. The shares to be issued to the Trojan shareholders will be
restricted securities within the meaning of the Securities Act.
The acquisition will be accounted for as a purchase.
TROJAN TELEVISION LIMITED
Trojan Television Limited is a London-based company doing business as The
Auction Channel. Founded in 1996, Trojan integrates live satellite, cable TV and
Web broadcasts of auction events conducted by auction houses, allowing for
participants to watch auction events on television and use the Internet or their
telephone to bid simultaneously with people actually present at the auction
house. Trojan has entered into agreements to provide its services with such
major auction houses as Christie's, Phillips, Bonhams and Brooks.
Attached hereto as Exhibit 99.1 is our press release, issued June 22,
1999, which is incorporated herein in its entirety by this reference.
RELATED TRANSACTIONS
DEED OF ASSIGNMENT
If we elect to acquire Trojan, the majority shareholders have agreed to
assign to us indebtedness in the approximate amount of 345,000 British Pounds
owed to them by Trojan. The indebtedness is secured by a first legal mortgage, a
first fixed charge and a first floating charge over Trojan's assets.
The indebtedness will be assigned to us pursuant to a deed of assignment
to be entered into by us with the majority shareholders on the date we close our
acquisition of Trojan. The purchase price we will pay for the indebtedness will
consist of the following:
o 70,000 British Pounds; and
Page 3
<PAGE>
o a number of shares of our common stock equal to approximately
$705,000 divided by the average closing price of a share of our
common stock as reported on the American Stock Exchange on the 15
trading days prior to the date of the deed, LESS 60,000 shares.
The shares of common stock will be paid within 9 days of the date of the
deed. Initially, approximately 80% of the shares of common stock will be
deposited into an escrow account and will be subject to offset for any claims we
may make for indemnification under the deed and under the share purchase
agreement.
We have agreed to file within 90 days of the date of the deed a
registration statement covering the resale of approximately 20% of the shares of
common stock.
SETTLEMENT AGREEMENT
Also in connection with our proposed acquisition of Trojan, we have
entered into a settlement agreement, dated April 30, 1999, with Articulate UK
Limited, Articulate Entertainment BV, Peter Farid Faisal Abdullah, Kai
Schuermann, Trojan, and certain other related parties relating to certain claims
asserted against Trojan. Each of the parties to the settlement agreement have
agreed to release each other from substantially all claims the parties may have
against the other parties.
As consideration for the parties obligations under the settlement
agreement, within 10 days following the closing of our proposed acquisition of
Trojan:
o we have agreed to issue to iBidLive, N.V., an affiliate of
Articulate UK Limited, (i) 175,000 shares of our common stock, (ii)
warrants to purchase up to 200,000 shares of our common stock at an
exercise price of $3.50 per share, which warrants will be
immediately vested and will expire 6 months following the closing of
the Trojan acquisition, and (iii) warrants to purchase up to 200,000
shares of our common stock at an exercise price of $4.00 per share,
which warrants will be immediately vested and will expire 12 months
following the closing of the Trojan acquisition; and
o Articulate UK Limited has agreed to cause iBidLive, N.V. to issue to
us (i) warrants to purchase up to 350,000 shares of common stock of
iBidLive, N.V. at an exercise price of Dfl 1.50 per share, which
warrants will be immediately vested and will expire on February 28,
2000, and (ii) warrants to purchase 100,000 shares of common stock
of iBidLive, N.V. at an exercise price of Dfl 1.25 per share, which
warrants will be immediately vested and will expire on February 28,
2000.
Page 4
<PAGE>
OTHER TRANSACTIONS
In April 1999, we sold the following number of shares of our common stock
to the following persons:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
<S> <C>
Time Helfet 126,000
Brent Cohen 126,000
Schuerman GbR 350,000
</TABLE>
Each of the purchasers is an indirect majority shareholder of Trojan. Tim
Helfet and Brent Cohen are members of TB Investments LLC, and paid $2.1875 per
share for their stock. Kai Schuerman, a beneficial owner of Schuerman GbR, is
also a shareholder of SF International Limited. Schuerman GbR paid $2.00 per
share for its stock.
FINANCIAL STATEMENTS
Set forth below are the historical financial statements of Trojan
Television Limited for the years ended June 30, 1998 and 1997 and for the nine
months ended March 31, 1999 and 1998, and the unaudited pro forma financial
statements of Brilliant Digital Entertainment, Inc. and Trojan Television
Limited in connection with the transactions contemplated by that certain
agreement for the sale and purchase of share capital of Trojan Television
Limited between SF International Limited and Others and Brilliant Digital
Entertainment, Inc.
Page 5
<PAGE>
TROJAN TELEVISION LIMITED
REPORT OF THE AUDITORS TO THE MEMBERS
We have audited the financial statements on pages 3 to 8, which have been
prepared under the historical cost convention and in accordance with accounting
principles generally accepted in the United States of America.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with generally accepted Auditing Standards.
An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
GOING CONCERN
In forming our opinion, we have considered the adequacy of the disclosures made
in Note 2 of the financial statements concerning the uncertainty as to the
likelihood of success of the directors efforts to raise further capital. In view
of the significance of this uncertainty we consider that it should be drawn to
your attention but our opinion is not qualified in this respect.
OPINION
In our opinion, the financial statements give a true and fair view of the state
of the company's affairs as at 30th June 1998 and of its loss for the year then
ended.
/s/ Edwards & Co.
EDWARDS & CO.
Registered Auditors
Chartered Accountants
London
DATE: 25 June 1999
Page 6
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED 30TH JUNE 1998
<CAPTION>
YEAR TO
30TH JUNE
1998
(British Pounds)
<S> <C>
Net sales 35,770
Costs and expenses:
Costs of sales 96,823
Selling and administrative 263,159
Interest 1,111
--------
361,093
--------
Net loss (325,323)
Accumulated deficit
Beginning of period (193,475)
--------
End of period (British Pounds) (518,798)
========
</TABLE>
Page 7
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
BALANCE SHEET
AS AT 30TH JUNE 1998
<CAPTION>
AS AT
30TH JUNE
1998
(British Pounds)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,713
Other current assets 4,521
--------
Total current assets 6,234
PROPERTY, PLANT AND EQUIPMENT
Office equipment 16,348
Accumulated depreciation and amortisation (6,038)
--------
10,310
--------
Total assets (British Pounds) 16,544
========
LIABILITIES AND SHAREHOLDERS DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses 65,141
Taxes, other than income taxes 17,212
Other current liabilities 98,872
--------
Total current liabilities 181,225
SHAREHOLDERS' DEFICIT
Common stock, 1p par value
Authorised shares - 40,000
Issued shares - 10,000 100
Additional paid in capital 354,017
Accumulated deficit (518,798)
--------
Total shareholders deficit (164,681)
--------
Total liabilities and shareholders' deficit (British Pounds) 16,544
========
</TABLE>
APPROVED BY THE BOARD ON 1999
...................................................
J GLEAVE
Page 8
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
STATEMENTS OF CASH FLOWS
AS AT 30TH JUNE 1998
<CAPTION>
12 MONTHS TO
30TH JUNE
1998
(British Pounds)
<S> <C>
Cash flows from operating activities
Net loss (325,323)
Adjustments to reconcile net loss to cash flows
used in operating activities
Depreciation 5,450
Changes in operating assets and liabilities
Decrease in accounts receivable 305
Increase in other current assets 1,240
Increase in current liabilities 128,103
--------
Net cash utilised by operating activities (190,225)
--------
Cash provided by shareholders 201,707
Cash flows from investing activities
Purchases of property and equipment (12,424)
--------
Net decrease in cash (942)
Cash at beginning of period 2,655
--------
Cash at end of period (British Pounds) 1,713
========
</TABLE>
Page 9
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
1. THE COMPANY
Trojan Television Limited ("the Company") was incorporated in June 1996 in
England and Wales and commenced trading on 1st July 1996. The company is
in the business of television and internet broadcasting of auctions and
related programming.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
and in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from these estimates.
REVENUE RECOGNITION
Revenue is recognised when the service which the company has been engaged
to supply has been completed.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets, less their estimated residual values, on a straight line basis
over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
Office equipment - over 3 years
WEBSITE AND SOFTWARE DEVELOPMENT
All costs incurred in the creation of the company's website and the
development of software are written off against income in the period in
which they are incurred.
Page 10
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
GOING CONCERN
Since the year end additional loans have been received by the company to
support the continuing development of its activities. The directors are
actively seeking further equity finance and negotiations are at an
advanced stage with Brilliant Digital Entertainment Inc, a US listed
corporation.
Due to the on-going support provided by these loans, the directors believe
it is appropriate to prepare the financial statements on the going concern
basis which assumes that the company will continue in operational
existence for the foreseeable future. In spite of the support received to
date, the company has been paying creditors outside of their normal terms
of trade.
If the company were unable to continue in operational existence for the
foreseeable future, adjustments would have to be made to reduce the
balance sheet values of assets to their recoverable amounts and to provide
for further liabilities that might arise, and to re-classify fixed assets
as current assets.
3. PROPERTY AND EQUIPMENT
Property and equipment at 30th June 1998 consisted of:
<TABLE>
<CAPTION>
1998
(British Pounds)
<S> <C>
Office equipment 16,348
Less: Accumulated depreciation 6,038
---------
(British Pounds) 10,310
=========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The company is in dispute with several creditors who are claiming they are
owed equity in the company. In order to dismiss the claim to equity the
company may have to pay a premium to the creditors although at the present
time the amount is undeterminable.
Subsequent to the balance sheet date, the company has continued to incur
substantial professional fees as a result of its restructuring and
potential future sale.
Page 11
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
5. RELATED PARTY TRANSACTIONS
As at 30th June 1998 the company had loans from several of its minority
shareholders, repayable on demand totalling (British Pounds)44,000.
6. INCOME TAXES
No liability to income taxes arises as a result of the losses made by the
company.
7. POST BALANCE SHEET EVENTS
Since the year end the company has entered into negotiations with two of
its clients over the company's commitment to broadcast a certain number of
auctions. As a result of these negotiations the company may have to bear
the cost of broadcasting these auctions for which no income will be
received from the auction house. No provision has been made in these
accounts.
Page 12
<PAGE>
TROJAN TELEVISION LIMITED
REPORT OF THE AUDITORS TO THE MEMBERS
We have audited the financial statements on pages 3 to 8, which have been
prepared under the historical cost convention and in accordance with accounting
principles generally accepted in the United States of America.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with generally accepted Auditing Standards.
An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
GOING CONCERN
In forming our opinion, we have considered the adequacy of the disclosures made
in Note 2 of the financial statements concerning the uncertainty as to the
likelihood of success of the directors efforts to raise further capital. In view
of the significance of this uncertainty we consider that it should be drawn to
your attention but our opinion is not qualified in this respect.
OPINION
In our opinion, the financial statements give a true and fair view of the state
of the company's affairs as at 30th June 1997 and of its loss for the period
then ended.
/s/ Edwards & Co.
EDWARDS & CO.
Registered Auditors
Chartered Accountants
London
DATE: 25 June 1999
Page 13
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD ENDED 30TH JUNE 1997
<CAPTION>
12 MONTHS TO
30TH JUNE
1997
(British Pounds)
<S> <C>
Net sales 259
Costs and expenses:
Costs of sales 47,658
Selling and administrative 145,431
Interest 645
--------
193,734
--------
Net loss (193,475)
Accumulated deficit
Beginning of period -
--------
End of period (British Pounds) (193,475)
========
</TABLE>
Page 14
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
BALANCE SHEET
AS AT 30TH JUNE 1997
<CAPTION>
AS AT
30TH JUNE
1997
(British Pounds)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 2,655
Other current assets 6,066
--------
Total current assets 8,721
PROPERTY, PLANT AND EQUIPMENT
Office equipment 3,924
Accumulated depreciation and amortisation (588)
--------
3,336
--------
Total assets (British Pounds) 12,057
========
LIABILITIES AND SHAREHOLDERS DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses 24,079
Taxes, other than income taxes 14,043
Other current liabilities 15,000
--------
Total current liabilities 53,122
SHAREHOLDERS' DEFICIT
Common stock, 1p par value
Authorised shares - 40,000
Issued shares - 10,000 100
Additional paid in capital 152,310
Accumulated deficit (193,475)
--------
Total shareholders deficit (41,065)
--------
Total liabilities and shareholders' deficit (British Pounds) 12,057
========
APPROVED BY THE BOARD ON 1999
</TABLE>
...................................................
J GLEAVE
Page 15
<PAGE>
<TABLE>
TROJAN TELEVISION LIMITED
STATEMENTS OF CASH FLOWS
AS AT 30TH JUNE 1997
<CAPTION>
12 MONTHS TO
30TH JUNE
1997
(British Pounds)
<S> <C>
Cash flows from operating activities
Net loss (193,475)
Adjustments to reconcile net loss to cash flows
used in operating activities
Depreciation 588
Changes in operating assets and liabilities
Increase in accounts receivable (305)
Increase in other current assets (5,761)
Increase in current liabilities 53,122
--------
Net cash utilised by operating activities (145,831)
--------
Cash provided by shareholders capital 152,410
Cash flows from investing activities
Purchases of property and equipment (3,924)
--------
Net increase in cash 2,655
Cash at beginning of period -
--------
Cash at end of period (British Pounds) 2,655
========
</TABLE>
Page 16
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30TH JUNE 1997
1. THE COMPANY
Trojan Television Limited ("the Company") was incorporated in June 1996 in
England and Wales and commenced trading on 1st July 1996. The company is
in the business of television and internet broadcasting of auctions and
related programming.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
and in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from these estimates.
REVENUE RECOGNITION
Revenue is recognised when the service which the company has been engaged
to supply has been completed.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets, less their estimated residual values, on a straight line basis
over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
Office equipment - over 3 years
WEBSITE AND SOFTWARE DEVELOPMENT
All costs incurred in the creation of the company's website and the
development of software are written off against income in the period in
which they are incurred.
Page 17
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30TH JUNE 1997
GOING CONCERN
Since the period end additional loans have been received by the company to
support the continuing development of its activities. The directors are
actively seeking further equity finance and negotiations are at an
advanced stage with Brilliant Digital Entertainment Inc, a US listed
corporation.
Due to the on-going support provided by these loans, the directors believe
it is appropriate to prepare the financial statements on the going concern
basis which assumes that the company will continue in operational
existence for the foreseeable future. In spite of the support received to
date, the company has been paying creditors outside of their normal terms
of trade.
If the company were unable to continue in operational existence for the
foreseeable future, adjustments would have to be made to reduce the
balance sheet values of assets to their recoverable amounts and to provide
for further liabilities that might arise, and to re-classify fixed assets
as current assets.
3. PROPERTY AND EQUIPMENT
Property and equipment at 30th June 1997 consisted of:
<TABLE>
<CAPTION>
1997
(British Pounds)
<S> <C>
Office equipment 3,924
Less: Accumulated depreciation 588
--------
(British Pounds) 3,336
========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The company is in dispute with several creditors who are claiming they are
owed equity in the company. In order to dismiss the claim to equity the
company may have to pay a premium to the creditors although at the present
time the amount is undeterminable.
Subsequent to the balance sheet date, the company has continued to incur
substantial professional fees as a result of its restructuring and
potential future sale.
Page 18
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30TH JUNE 1997
5. RELATED PARTY TRANSACTIONS
As at 30th June 1997 the company had loans from several of its minority
shareholders, repayable on demand, totalling (British Pounds)15,000.
6. INCOME TAXES
No liability to income taxes arises as a result of the losses made by the
company.
7. POST BALANCE SHEET EVENTS
Since the period end the company has entered into negotiations with two of
its clients over the company's commitment to broadcast a certain number of
auctions. As a result of these negotiations the company may have to bear
the cost of broadcasting these auctions for which no income will be
received from the auction house. No provision has been made in these
accounts.
Page 19
<PAGE>
TROJAN TELEVISION LIMITED
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
AS AT 31ST MARCH 1999
9 MONTHS TO
31ST MARCH
1999
(BRITISH POUNDS)
Net sales 218,675
----------
Costs and expenses:
Costs of sales 28,061
Selling and administrative 987,071
Interest 9,172
------------
1,024,304
------------
Net loss (805,629)
Accumulated deficit
Beginning of period (518,798)
------------
End of period (British Pounds) (1,324,427)
=======
Page 20
<PAGE>
TROJAN TELEVISION LIMITED
BALANCE SHEET
AS AT 31ST MARCH 1999
AS AT
31ST MARCH
1999
(BRITISH POUNDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 3,764
Other current assets 33,469
----------
Total current assets 37,233
PROPERTY, PLANT AND EQUIPMENT
Office equipment 19,931
Accumulated depreciation and amortisation (11,521)
----------
8,410
----------
Total assets (British Pounds) 45,643
======
LIABILITIES AND SHAREHOLDERS DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses 363,418
Taxes, other than income taxes 17,122
Other current liabilities 635,413
------------
Total current liabilities 1,015,953
SHAREHOLDERS' DEFICIT
Common stock, 1p par value
Authorised shares - 40,000
Issued shares - 10,000 100
Additional paid in capital 354,017
Accumulated deficit (1,324,427)
------------
Total shareholders deficit (970,310)
----------
Total liabilities and shareholders' deficit (British Pounds) 45,643
======
Page 21
<PAGE>
TROJAN TELEVISION LIMITED
STATEMENTS OF CASH FLOWS
AS AT 31ST MARCH 1999
9 MONTHS TO
31ST MARCH
1999
(BRITISH POUNDS)
Cash flows from operating activities
Net loss (805,629)
Adjustments to reconcile net loss to cash flows
used in operating activities
Depreciation 5,483
Changes in operating assets and liabilities
Increase in accounts receivable -
Decrease in other current assets (28,948)
Increase in current liabilities 834,728
----------
Net cash utilised by operating activities 5,634
----------
Cash flows from investing activities
Purchases of property and equipment (3,583)
----------
Net increase in cash 2,051
Cash at beginning of period 1,713
----------
Cash at end of period (British Pounds) 3,764
======
Page 22
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST MARCH 1999
1. THE COMPANY
Trojan Television Limited ("the Company") was incorporated in June 1996 in
England and Wales. The company is in the business of television and
internet broadcasting of auctions and related programming.
2. SIGNIFICANT ACOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
and in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements.
Actual results could differ from these estimates.
REVENUE RECOGNITION
Revenue is recognised when the service which the company has been engaged
to supply has been completed.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets, less their estimated residual values, on a straight line basis
over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
Office equipment - over 3 years
WEBSITE AND SOFTWARE DEVELOPMENT
All costs incurred in the creation of the company's website and the
development of software are written off against income in the period in
which they are incurred.
Page 23
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST MARCH 1999
GOING CONCERN
Since the period end additional loans have been received by the company to
support the continuing development of its activities. The directors are
actively seeking further equity finance and negotiations are at an
advanced stage with Brilliant Digital Entertainment Inc, a US listed
corporation.
Due to the on-going support provided by these loans, the directors believe
it is appropriate to prepare the financial statements on the going concern
basis which assumes that the company will continue in operational
existence for the foreseeable future. In spite of the support received to
date, the company has been paying creditors outside of their normal terms
of trade.
If the company were unable to continue in operational existence for the
foreseeable future, adjustments would have to be made to reduce the
balance sheet values of assets to their recoverable amounts and to provide
for further liabilities that might arise, and to re-classify fixed assets
as current assets.
3. OTHER CURRENT ASSETS
Other current assets comprise amounts due from HM Customs and Excise.
4. PROPERTY AND EQUIPMENT
Property and equipment at 31st March 1999 consisted of:
1999
(BRITISH POUNDS)
Office equipment 19,931
Less: Accumulated depreciation 11,521
----------
(British Pounds) 8,410
======
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
This includes accrued expenses of (British Pounds) 150,000 in respect of
professional fees incurred as a result of the company's restructuring and
future investment requirements. The company continues to incur
professional fees, the full eventual cost of which are currently
indeterminable.
Page 24
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST MARCH 1999
6. OTHER CURRENT LIABILITIES
Included with other current liabilities is (British Pounds) 96,583 due to
the provider of the company's main software. This balance is payable by
instalments over the next eight months.
7. SHARE CAPITAL
On 13th April 1999 the company increased its share capital to (British
Pounds) 2,000. The 1p shares were subdivided into shares of 0.1p. The
authorised share capital therefore became 2,000,000 shares of 0.1p on that
date.
On 13th April 1999 the company made a 2 for 1 bonus issue, increasing the
total number of issued shares to 300,000 shares of 0.1p.
8. COMMITMENTS AND CONTINGENCIES
The company is in dispute with several creditors totalling (British
Pounds) 131,340 who are claiming they are owed equity in the company. In
order to dismiss the claim to equity the company may have to pay a premium
to the creditors although at the present time the amount is
undeterminable.
Subsequent to the balance sheet date, the company has continued to incur
substantial professional fees as a result of its restructuring and
potential future sale.
The company is in negotiations with two of its clients over the company's
commitment to broadcast a certain number of auctions. As a result of these
negotiations the company may have to bear the cost of broadcasting
auctions for which no income will be received from the auction house. No
provision has been made in these accounts for the cost of those auctions
which is indeterminable at the present time and will be dependent on the
ancillary income, if any, that the company is able to generate.
One of the directors has made an expense claim for (British Pounds) 12,500
which is in dispute and has not been provided in these accounts.
9. RELATED PARTY TRANSACTIONS
As at 31st March 1999 the company had loans from several of its minority
shareholders, repayable on demand, totalling (British Pounds) 42,500 which
were guaranteed by the director Jason Gleave (1998 - (British Pounds)
44,000).
Included within other loans due within one year is (British Pounds) 5,000
owed to the director Jason Gleave.
Page 25
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST MARCH 1999
10. INCOME TAXES
No liability to income taxes arises as a result of the losses made by the
company.
Page 26
<PAGE>
TROJAN TELEVISION LIMITED
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD ENDED 31ST MARCH 1998
PERIOD TO
31ST MARCH
1998
(BRITISH POUNDS)
Net sales 35,729
Costs and expenses:
Costs of sales 79,559
Selling and administrative 176,152
Interest 677
----------
256,388
----------
Net loss (220,659)
Accumulated deficit
Beginning of period (193,475)
----------
End of period (British Pounds) (414,134)
======
Page 27
<PAGE>
TROJAN TELEVISION LIMITED
BALANCE SHEET
AS AT 31ST MARCH 1998
AS AT
31ST MARCH
1998
(BRITISH POUNDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4,611
Other current assets 2,999
----------
Total current assets 7,610
PROPERTY, PLANT AND EQUIPMENT
Office equipment 12,992
Accumulated depreciation and amortisation (4,919)
----------
8,073
----------
Total assets (British Pounds) 15,683
======
LIABILITIES AND SHAREHOLDERS DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses
25,533
Taxes, other than income taxes 10,309
Other current liabilities 39,858
----------
Total current liabilities 75,700
SHAREHOLDERS' DEFICIT
Common stock, 1p par value 100
Authorised shares - 40,000
Issued shares - 10,000
Additional paid in capital 354,017
Accumulated deficit (414,134)
----------
Total shareholders deficit (60,017)
----------
Total liabilities and shareholders' deficit (British Pounds) 15,683
======
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<PAGE>
TROJAN TELEVISION LIMITED
STATEMENTS OF CASH FLOWS
AS AT 31ST MARCH 1998
9 MONTHS TO
31ST MARCH
1998
(BRITISH POUNDS)
Cash flows from operating activities
Net loss (220,659)
Adjustments to reconcile net loss to cash flows
used in operating activities
Depreciation 4,331
Changes in operating assets and liabilities
Decrease in accounts receivable -
Increase in other current assets 3,067
Increase in current liabilities 22,578
----------
Net cash utilised by operating activities (190,683)
----------
Cash provided by shareholders 201,707
Cash flows from investing activities
Purchases of property and equipment (9,068)
----------
Net increase in cash 1,956
Cash at beginning of period 2,655
----------
Cash at end of period (British Pounds) 4,611
======
Page 29
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 9 MONTHS ENDED 31ST MARCH 1998
1. THE COMPANY
Trojan Television Limited ("the Company") was incorporated in June 1996 in
England and Wales and commenced trading on 1st July 1996. The company is
in the business of television and internet broadcasting of auctions and
related programming.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
and in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from these estimates.
REVENUE RECOGNITION
Revenue is recognised when the service which the company has been engaged
to supply has been completed.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated so as to write off the cost of tangible fixed
assets, less their estimated residual values, on a straight line basis
over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
Office equipment - over 3 years
WEBSITE AND SOFTWARE DEVELOPMENT
All costs incurred in the creation of the company's website and the
development of software are written off against income in the period in
which they are incurred.
Page 30
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 9 MONTHS ENDED 31ST MARCH 1998
GOING CONCERN
Since the period end additional loans have been received by the company to
support the continuing development of its activities. The directors are
actively seeking further equity finance and negotiations are at an
advanced stage with Brilliant Digital Entertainment Inc, a US listed
corporation.
Due to the on-going support provided by these loans, the directors believe
it is appropriate to prepare the financial statements on the going concern
basis which assumes that the company will continue in operational
existence for the foreseeable future. In spite of the support received to
date, the company has been paying creditors outside of their normal terms
of trade.
If the company were unable to continue in operational existence for the
foreseeable future, adjustments would have to be made to reduce the
balance sheet values of assets to their recoverable amounts and to provide
for further liabilities that might arise, and to re-classify fixed assets
as current assets.
3. PROPERTY AND EQUIPMENT
Property and equipment at 31st March 1998 consisted of:
1998
(BRITISH POUNDS)
Office equipment 12,992
Less: Accumulated depreciation 4,919
----------
(British Pounds) 8,073
======
4. COMMITMENTS AND CONTINGENCIES
The company is in dispute with several creditors who are claiming they are
owed equity in the company. In order to dismiss the claim to equity the
company may have to pay a premium to the creditors although at the present
time the amount is undeterminable.
Subsequent to the balance sheet date, the company has continued to incur
substantial professional fees as a result of its restructuring and
potential future sale.
Page 31
<PAGE>
TROJAN TELEVISION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 9 MONTHS ENDED 31ST MARCH 1998
5. RELATED PARTY TRANSACTIONS
As at 31st March 1998 the company had loans from several of its minority
shareholders, repayable on demand, totalling (British Pounds) 44,000.
6. INCOME TAXES
No liability to income taxes arises as a result of the losses made by the
company.
7. POST BALANCE SHEET EVENTS
Since the period end the company has entered into negotiations with two of
its clients over the company's commitment to broadcast a certain number of
auctions. As a result of these negotiations the company may have to bear
the cost of broadcasting these auctions for which no income will be
received from the auction house. No provision has been made in these
accounts.
Page 32
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are based on the
financial statements of Brilliant Digital Entertainment, Inc. and Trojan
Television Limited combined and adjusted to give effect to:
o the acquisition by Brilliant of the stock of Trojan;
o the purchase by Brilliant of a promissory note payable by Trojan; and
o the acquisition by Brilliant of certain rights to proprietary technology
owned by a third party, certain of which were formerly held by Trojan.
The acquisition of these items (collectively referred to as the "Acquisition")
will be effected through the exchange of approximately 757,000 shares of
Brilliant common stock, after estimated adjustments to be determined following
the Acquisition, and warrants to acquire an additional 400,000 shares of
Brilliant common stock. The substantial majority of the shares will be
restricted within the meaing of the Securities Act. The value of the stock and
warrants is approximately $6.8 million based on the closing price of Brilliant's
common stock on June 21, 1999. The pro forma adjustments are described in the
accompanying notes to the unaudited pro forma financial statements.
These pro forma combined financial statements conform to Brilliant's fiscal
year-end of December 31. Trojan's fiscal year-end is June 30 and therefore, in
accordance with Rule 11-02(c)(3) of Regulation S-X, the results of Trojan have
been recast to reflect Trojan's results for the year ended December 31.
The unaudited pro forma combined statements of income for the three months ended
March 31, 1999 and for the year ended December 31, 1998 give effect to the
Acquisition as if it had occurred on January 1, 1998. The unaudited pro forma
combined balance sheet at March 31, 1999 gives effect to the Acquisition as if
it had occurred on such date.
The unaudited pro forma combined financial statements are not necessarily
indicative of the results of operations or financial position of Brilliant that
would have occurred had the Acquisition occurred at the beginning of each period
presented or on the date indicated, nor are they necessarily indicative of
future operating results or financial position. They should be read in
conjunction with (i) the notes hereto, (ii) Brilliant's unaudited financial
statements and the notes thereto as of and for the quarter ended March 31, 1999,
included in the Form 10-QSB of Brilliant for the quarterly period ended March
31, 1999, and Brilliant's audited financial statements and the notes thereto as
of and for the year ended December 31, 1998, included in Brilliant's Annual
Report on Form 10-KSB for the year ended December 31, 1998, and (iii) the
audited and unaudited financial information for Trojan included in this Form
8-K.
The unaudited proforma combined financial statements have been preliminarily
prepared on the basis that:
o A third of the value to be paid for the acquisition of rights to
proprietary technology owned by a third party and used by Trojan in its
business should be allocated to goodwill. We may determine that a
different allocation is more appropriate. If so, the allocation to
goodwill could be as low as 0% and as high as 70%.
o The amortization period for the purchased rights to the proprietary
technology is two years. We may determine that a different period is more
appropriate. If so, the amortization period could be as short as six
months and as long as five years.
o The amortization period for the goodwill acquired from Trojan is five
years. We may determine that a different period is more appropriate. If
so, the amortization period for the goodwill could be as short as three
years and as long as 10 years.
Page 33
<PAGE>
<TABLE>
BRILLIANT DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
INCLUDING TROJAN TELEVISION ACQUISITION
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except share data)
<CAPTION>
As reported
----------------------- Pro Forma Combined
Brilliant Trojan Adjustments Eliminations Pro Forma
--------- ------ ----------- ----------- ---------
Revenues:
<S> <C> <C> <C> <C> <C>
Software sales $221 $221
Development fees 210 210
Other income $17 17
--------- ------ ---------- ---------- ---------
Total revenues 431 17 448
Cost of revenues 1,383 20 1,403
--------- ------ ---------- ---------- ---------
Gross profit (loss) (952) (3) (955)
Operating expenses:
Sales and marketing 1,785 1,785
General and administrative 2,936 1,262 (50) 4,148
Research and development 3,798 3,798
Depreciation and Amortization 390 1,944 4,5 2,334
--------- ------ ---------- ---------- ---------
Total operating expenses 8,909 1,262 1,894 12,064
--------- ------ ---------- ---------- ---------
Income (loss) from operations (9,861) (1,265) (1,894) (13,020)
Other income (expense):
Export market development grant 73 73
Foreign exchange gain (loss) (5) (15) (20)
Interest income (expense) net 368 (8) (15) 15 6 360
--------- ------ ---------- ---------- ---------
Total other income (expense) 436 (23) (15) 15 413
--------- ------ ---------- ---------- ---------
Income (loss) before income taxes (9,425) (1,288) (1,909) 15 (12,607)
--------- ------ ---------- ---------- ---------
Income taxes
Net income (loss) ($9,425) ($1,288) ($1,909) 15 ($12,607)
========= ====== ========== ========== ==========
Other comprehensive income:
Foreign currency translation adjustment
(net of tax effect) 72 72
--------- ------ ---------- ---------- ---------
Comprehensive income (loss) ($9,353) ($1,288) ($1,909) $15 ($12,535)
========= ====== ========== ========== =========
Basic and diluted net income (loss) per share ($1.00) ($1.19)
========= =========
Weighted average number of shares used
in computing basic and diluted net income
(loss) per share 9,403 1,157 1,2,3 10,560
========= ========== ========== =========
</TABLE>
Page 34
<PAGE>
<TABLE>
BRILLIANT DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
INCLUDING TROJAN TELEVISION ACQUISITION
AT MARCH 31, 1999
(In thousands)
<CAPTION>
As reported
------------------------ Pro Forma Combined
Brilliant Trojan Adjustments Eliminations Pro Forma
------------ --------- ------------ ------------- --------------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $1,632 $6 $273 3 $1,911
Accounts receivable 2,084 2,084
Other assets 258 54 312
------------ --------- ------------ --------- --------------
Total current assets 3,974 60 273 4,307
Property, plant and equipment, net 684 14 698
Movie software costs 491 491
Goodwill 5,688 1,2,4 5,688
Other assets 426 2,112 2,5 ($500) 6 2,038
------------ --------- ------------ --------- --------------
Total assets $5,575 $74 $8,073 ($500) 13,222
============ ========= ============ ========= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $264 $614 $878
Accrued and other liabilities 1,148 1,026 ($161) 1,2,3 ($500) 6 1,513
Current portion of note payable 172 172
------------ --------- ------------ --------- --------------
Total current liabilities 1,584 1,640 (161) (500) 2,563
Note payable, less current portion 91 91
Convertible debenture 100 100
Other long term liabilities 110 110
------------ --------- ------------ --------- --------------
Total liabilities 1,885 1,640 (161) (500) 2,864
Stockholders' equity:
Preferred stock
Common stock 9 1 0 1,2,3 10
Additional paid-in capital 21,357 570 6,097 1,2,3 28,024
Accumulated deficit (17,575) (2,137) 2,137 (17,575)
Accumulated other comprehensive loss (101) (101)
------------ --------- ------------ --------- --------------
Total stockholders' equity 3,690 (1,566) 8,234 10,358
------------ --------- ------------ --------- --------------
Total liabilities and stockholders' equity $5,575 $74 $8,073 ($500) $13,222
============ ========= ============ ========= ==============
</TABLE>
Page 35
<PAGE>
<TABLE>
BRILLIANT DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
INCLUDING TROJAN TELEVISION ACQUISITION
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(In thousands, except share data)
<CAPTION>
As reported
------------------------ Pro Forma Combined
Brilliant Trojan Adjustments Eliminations Pro Forma
------------ --------- ------------- ----------- --------------
Revenues:
<S> <C> <C> <C> <C> <C>
Software sales $152 $152
Development fees 54 54
Other Income 0 $342 342
------------ --------- ------------ ---------- --------------
Total revenues 206 342 548
Cost of revenues 205 21 226
------------ --------- ------------ ---------- --------------
Gross profit (loss) 1 321 322
Operating expenses:
Sales and marketing 222 222
General and administrative 619 661 1,280
Research and development 981 981
Depreciation and amortization 130 $486 4,5 618
------------ --------- ------------ ---------- --------------
Total operating expenses 1,952 661 486 3,098
------------ --------- ------------ ---------- --------------
Income (loss) from operations (1,951) (340) (486) (2,777)
Other income (expense):
Export market development grant 37 37
Foreign exchange gain (loss) 45 45
Interest income (expense) net 24 (7) 7 6 24
------------ --------- ------------ ---------- --------------
Total other income (expense) 61 38 7 106
------------ --------- ------------ ---------- --------------
Income (loss) before income taxes (1,890) (302) (486) 7 (2,671)
Income taxes
------------ --------- ------------ ---------- --------------
Net income (loss) ($1,890) ($302) ($486) 7 ($2,671)
============ ========= ============ ========== ==============
Other comprehensive income:
Foreign currency translation adjustment
(net of tax effect) 22 22
------------ --------- ------------ ---------- --------------
Comprehensive income (loss) ($1,868) ($302) ($486) 7 ($2,649)
============ ========= ============ ========== ==============
Basic and diluted net income (loss) per share ($0.20) ($0.25)
============ ==============
Weighted average number of shares used
in computing basic and diluted net income
(loss) per share 9,409 1,157 1,2,3 10,566
============ ============ ==============
</TABLE>
Page 36
<PAGE>
BRILLIANT DIGITAL ENTERTAINMENT, INC, AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The pro forma balance sheet has been prepared to reflect the acquisition of
100% of the stock of Trojan Television ("Trojan") by Brilliant Digital
Entertainment, Inc. ("Brilliant") for an aggregate price of $3,316,000,
representing 506,000 shares of Brilliant stock which will be transferred to the
current owners of Trojan. Additionally, Brilliant issued to an unrelated third
party 175,000 shares of Brilliant stock and warrants to purchase up to 400,000
shares of Brilliant common stock (collectively valued at $2,418,000) in order
to settle certain claims to ownership of Trojan and to acquire an exclusive
license to certain software technology which is used by Trojan. Finally,
Brilliant issued 76,000 shares of Brilliant common stock to certain
shareholders of Trojan to satisfy an outstanding loan and certain other amounts
due to these shareholders. For purposes of the valuation of Brilliant's stock,
the Company used the simple average of the closing share price for the day
preceding, the day of and the two days subsequent to the public announcement of
the purchase.
The following describes each pro forma entry to the unaudited combined balance
sheet as of March 31, 1999:
(1) Reflects the issuance of common shares to acquire Trojan and the
elimination of the common shareholders' equity accounts of Trojan. We
believe that the fair value of the assets and liabilities acquired
approximates their book value and, as a result a valuation of these assets
and liabilities has not been undertaken. The excess of the purchase price
over the value of the net assets acquired has been recorded as goodwill.
(2) Reflects the issuance of common stock and warrants to purchase shares of
common stock to (1) settle the claims to ownership of Trojan (2) acquire
an exclusive license to certain software technology which is used by
Trojan. We have not undertaken a formal valuation of the software
technology, however, we feel that the allocation of $1,612,000 to this
software technology is reasonable. This allocation may change based on a
formal third party valuation. The remainder of the value ($806,000) has
been recorded as goodwill. Warrants currently in the money are assumed
exercised on the first day available for exercise.
(3) Reflects cash paid in to the company by certain Trojan shareholders
increasing a loan payable to these shareholders, the issuance of common
stock to purchase the loan, and the adjustment to accrued liabilities on
consummation of the acquisition.
The following describes each pro forma entry to the unaudited combined
statement of operations for the three months ended March 31, 1999 and the year
ended December 31, 1998:
(4) Reflects the amortization of goodwill over five years ($284,000 for the
three months ended March 31, 1999 and $1,138,000 for the year ended
December 31, 1998.
(5) Reflects the amortization of the exclusive software
technology license over two years ($202,000 for the three months ended
March 31, 1999 and $806,000 for the year ended December 31, 1998).
(6) Reflects the elimination of interest expense on the loan payable to be
repaid, and the elimination of the loan.
Page 37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
July 1, 1999 BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ MICHAEL OZEN
------------------------
Michael Ozen
Chief Financial Officer
Page 38
<PAGE>
EXHIBIT INDEX
EXHIBITS
23.1 Consent of Edwards & Co.
99.1 Press Release of Registrant, issued June 22, 1999, with respect to the
acquisition of Trojan Television Limited.
Page 39
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-56519) and
the incorporation by reference in the Registration Statement on Form S-8 (No.
333-18411) of Brilliant Digital Entertainment, Inc. of our report dated 25 June
1999 relating to the financial statements of Trojan Television Limited which
appears in the Current Report on Form 8-K of Brilliant Digital Entertainment,
Inc. dated July 1, 1999.
/s/ Edwards & Co.
Edwards & Co
London, England
July 1, 1999
CONTACT: FOR IMMEDIATE RELEASE
Sue Bohle/Charlie Ecker
The Bohle Company
(310) 785-0515, x 223 or 249
[email protected]
BRILLIANT DIGITAL ENTERTAINMENT TO ACQUIRE THE AUCTION CHANNEL
COMPANY PROVIDES INTERNET BIDDING AND SIMULTANEOUS TV BROADCAST
OF LIVE AUCTION EVENTS
LOS ANGELES--(BUSINESS WIRE)--June 22, 1999-- Brilliant Digital Entertainment
(AMEX:BDE - NEWS), a pioneering content and tools developer for the convergence
of media on the Internet, announced today it will acquire Trojan Television, a
London-based company doing business as The Auction Channel.
Trojan Television will become a subsidiary of Brilliant through an exchange of
approximately 840,000 restricted common shares and 400,000 warrants valued at
approximately $7.3 million.
Founded in 1996, The Auction Channel integrates live satellite, cable TV and Web
broadcasts of auction events conducted by Christie's, Phillips, Bonhams, Brooks,
and other major auction houses with whom the company has contracts, allowing
interactive bidding simultaneously on the Internet and/or television.
Since starting to work with its auction house and media broadcast partners, The
Auction Channel has dramatically increased the viewing audience for auction
programming and generated substantial sales from online and telephone bids,
according to the company.
Mark Dyne, Brilliant chairman and chief executive officer, said the acquisition
of The Auction Channel provides a timely opportunity for Brilliant to expand its
digital entertainment content on the Internet and television broadcast and to
leverage its content and e-commerce capabilities to deliver business through
online transactions.
"Brilliant has an arsenal of proprietary tools, technologies and content, which
uniquely positions it to produce integrated programming designed to broaden
audience participation for events broadcast live on television or over the Web,"
Dyne said. "Our 3D animated content is very effective in retaining Web site
traffic. Content programming executives have also found it reduces production
costs and enables fast delivery of animation for narrow band."
Jason Gleave, founder and managing director, The Auction Channel, commented:
"Brilliant is a perfect partner for The Auction Channel. The company has
technology we can use to enhance auction events and access to capital to support
the accelerated growth of our business."
The Auction Channel pioneered the broadcast delivery of high-profile consumer
and commercial auction events on both sides of the Atlantic, as well as in Asia.
The Auction Channel was first to
Page 1
<PAGE>
introduce an automated telephone bidding system, first to broadcast auction
events allowing Internet buyers to bid at an auction in real time and first to
deliver "live" auctions simultaneously on the Internet and over television and
satellite networks, facilitating larger audiences and real time e-commerce
transactions.
Viewership for events broadcast by The Auction Channel has been climbing since
last fall. A Formula 1 Legends event broadcast for Brooks in Dec. 1998 featuring
memorabilia, generated strong TV ratings for The Auction Channel's U.K.
television network partner, Sky Sports, a News Corp. Subsidiary (NYSE:NWS -
NEWS). Interactive bids were recorded on 50 percent of the items offered.
In March, Sky Sports broadcast a Soccer Legends event conducted by Bonham's. In
excess of 750,000 viewers watched the preview programs and live event. More than
50 percent of the items were sold to interactive bidders.
Again, in April, a Fine Fishing Tackle event for Bonham's had over 500,000
viewers for the preview programs and live event.
The high end of the auction market -- a market particularly well-served by The
Auction Channel's proprietary live auction delivery system -- includes more than
200 auction houses and 7,500 dealers in fine art, antiques and collectibles. The
two largest houses alone, Christie's and Sotheby's, had aggregate annual sales
of almost $4 billion in 1998, according to Forbes magazine.
Brilliant Digital Entertainment plans to establish joint venture agreements with
telecommunications and media companies worldwide to deliver direct, live auction
broadcasts into consumer homes or businesses with full, "live," transaction
capability over the Internet. Brilliant's e-commerce transaction software will
be leveraged to improve and expand access to bidding.
"Brilliant plans to expand the geographic scope of our auction broadcasts so
that interested viewers in Europe, Asia and the Americas will be able to watch
important auctions simultaneously," Dyne said. "Anyone with a television set and
a telephone or Internet access device will be able to watch the action and bid
simultaneously with people on the floor at the auction. There's no question
viewers will want to participate."
Brilliant recently completed a $4.3 million private placement, which includes a
number of individual investors with significant media distribution experience
and ongoing industry relationships. Participating were Prince Ahmad Bin Khalid
Al Saud, a media industry investor and member of the Royal Family of Saudi
Arabia; entities associated with Tim Helfet, president and CEO, Rysher
Entertainment; Martin Schuermann, U.S.A. representative of CLT-UFA; Barry
Baeres, president of Intertainment Aktiengesellschaft, Germany; and Brent Cohen,
formerly president, Packard Bell NEC. Additional financing by way of a $6.0
million stand-by equity line of credit was secured by Brilliant.
Brilliant Digital Entertainment is the tools developer and production studio
responsible for creating Multipath(TM) Movies (HTTP://WWW.MULTIPATHMOVIES.COM),
distributed over the
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Internet, on CD-ROM and DVD, as television programming and for home video.
Brilliant's next-generation digital movies are developed using B3D Studio(TM).
Brilliant Digital Entertainment has alliances with @Home, Road Runner, DVD
EXPRESS, Kesmai's GameStorm and Mediadome, to distribute products via the
Internet's World Wide Web, GT Interactive, The Learning Company and SlingShot
for CD-ROM and DVD and in television markets through Kaleidescope Media Group.
Brilliant Digital Entertainment has headquarters in Los Angeles and has offices
in Australia and England. The Auction Channel has headquarters in London and
plans to open offices in a number of major cities worldwide over the next year.
More information on Brilliant Digital Entertainment may be found at
HTTP://WWW.BDE3D.COM. The Auction Channel has a Web site at
HTTP://WWW.THEAUCTIONCHANNEL.COM.
# # #
This announcement contains forward-looking statements that involve risks and
uncertainties, including those relating to the closing of this transaction.
Actual results could differ materially from those discussed. Factors that could
cause or contribute to such differences include, but are not limited to, the
receipt and timing of regulatory approvals, stock price movements, the company's
ability to integrate this new business, the company's ability to manage a
European based subsidiary, the limited operating history of the company and The
Auction Channel, anticipated losses, unpredictability of future revenues,
potential fluctuations in quarterly operating results, seasonality, competition
with significantly larger competitors, risks associated with system development
and operation, management of potential growth, and risks of new business areas,
international expansion, business combinations, and strategic alliances and all
of the factors that may influence future business and financial results,
including those set forth in the company's Form 10-KSB for the period ended Dec.
31, 1998 and the company's Form 10-QSB for the three months ended March 31,
1999. All forward-looking statements are based on information available to the
company on the date hereof, and the company assumes no obligation to update such
statements. Copies of the company's most recently filed Form 10-KSB report and
10-QSB report are available from Brilliant Digital Entertainment's Investor
Relations department and may be obtained by calling or writing to the company's
investor relations company, Jaffoni & Collins at 212/835-8500 or [email protected].
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