As filed with the Securities and Exchange Commission on April 14, 2000.
Registration No.333-78733
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BRILLIANT DIGITAL ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4592204
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
6355 TOPANGA CANYON BOULEVARD, SUITE 120
WOODLAND HILLS, CALIFORNIA 91367
(818) 346-3653
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
MARK DYNE, CHIEF EXECUTIVE OFFICER
6355 TOPANGA CANYON BOULEVARD, SUITE 120
WOODLAND HILLS, CALIFORNIA 91367
(818) 346-3653
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
COPIES TO:
Murray Markiles, Esq.
John J. McIlvery, Esq.
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East
Los Angeles, California 90067
(310) 728-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities on this form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THIS POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT 333-78733
SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(C) OF THE
SECURITIES ACT OF 1933 ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(C), MAY DETERMINE.
EXPLANATORY NOTE
Pursuant to Rule 401(e) of the Securities Act of 1933, the Registrant is
filing this post-effective amendment to Form SB-2 on Form S-3 to update the
information contained in the Prospectus included in the Registrant's
Registration Statement on Form SB-2, as amended (Registration Statement No.
333-78733).
===============================================================================
<PAGE>
SUBJECT TO COMPLETION - APRIL 14, 2000
PROSPECTUS
BRILLIANT DIGITAL ENTERTAINMENT, INC.
2,040,000 SHARES OF COMMON STOCK
This prospectus may be used only in connection with the resale by St. Annes
Investments, Ltd. or its assigns of shares of the common stock of BRILLIANT
DIGITAL ENTERTAINMENT as follows:
o Up to 2,000,000 shares of common stock that may be sold by us to St.
Annes under a securities purchase agreement; and
o Up to 40,000 shares of common stock that may be issued by us to St.
Annes as a fee under the securities purchase agreement; and
We will sell the shares of common stock to St. Annes at a discount to the
then current market price of the common stock, as follows:
o If the market price is $4.00 or less, then the price for the shares
shall be 86% of the market price; and
o If the market price is greater than $4.00, then the price shall be 88%
of the market price.
The shares of common stock offered using this prospectus may be resold from
time to time by St. Annes. We will not receive any of the proceeds from the sale
of the shares by St. Annes.
BRILLIANT'S common stock is traded on the American Stock Exchange under the
symbol "BDE." On April 12, 2000, the closing sale price of the common stock on
the American Stock Exchange was $8.375 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SHARES.
We have registered with the Securities and Exchange Commission the resale
by some of our stockholders of up to 4,942,011 shares of our common stock. The
resale of the 4,942,011 shares may occur concurrently with the resale by the
selling stockholder of the shares to be sold using this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated ___________, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY..........................................................3
RISK FACTORS................................................................4
FORWARD-LOOKING STATEMENTS.................................................11
USE OF PROCEEDS............................................................11
SELLING STOCKHOLDER........................................................12
PLAN OF DISTRIBUTION.......................................................14
WHERE YOU CAN FIND MORE INFORMATION........................................16
LEGAL MATTERS..............................................................16
EXPERTS....................................................................16
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PROSPECTUS SUMMARY
ABOUT BRILLIANT DIGITAL ENTERTAINMENT
Brilliant Digital Entertainment is a pioneering entertainment content
provider and 3D animation technology developer for the converging Internet and
television markets. We have expanded our business to include the broadcast and
webcast over the Internet and television, of live auctions through our
subsidiary, The Auctionchannel, Inc.
We use our proprietary software tools to develop and distribute
digitally-animated interactive content for the Internet, including our
Multipath(TM) Movies. We also develop technology and software tools for sale to
others to be used by them in the development of content for the Internet. Our
subsidiary, The Auction Channel, enables viewers to watch auction events on
television or the Internet and use the Internet or their telephone to bid in
real time against bidders present at an auction.
ABOUT THE OFFERING
This prospectus may be used only in connection with the resale by the
selling stockholder, St. Annes Investments, Ltd., of up to 2,040,000 shares of
our common stock.
We will not receive any proceeds from the sale of the shares of common
stock offered by the selling stockholder using this prospectus. As of April 4,
2000, we had 14,361,626 shares of common stock outstanding.
CORPORATE INFORMATION
We are a Delaware corporation that was incorporated in July 1996. We
were formed through the combination of two businesses: Brilliant Interactive
Ideas, Pty. Ltd., an entertainment software developer and producer, and Sega
Australia New Developments, a research and development operation for leading
edge software tools. We acquired Trojan Television Limited in July 1999, and are
in the process of transferring Trojan to our subsidiary, The Auctionchannel,
Inc. Our executive offices are located at 6355 Topanga Canyon Boulevard, Suite
120, Woodland Hills, California 91367, and our telephone number is (818)
615-1500. Information on our websites, www.multipathmovies.com and
www.theauctionchannel.com, does not constitute part of this prospectus.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THE
MATERIAL ONES FACING OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER.
IF THIS OCCURS, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
WE WILL NOT BE ABLE TO GENERATE REVENUES IF OUR MULTIPATH MOVIES DO NOT ACHIEVE
MARKET ACCEPTANCE.
Each Multipath Movie is an individual artistic work, and its ability to
generate revenues primarily will be determined by consumer reaction, which is
unpredictable. To generate revenues, we must develop stories and characters that
capture the attention and imagination of consumers and license recognized
characters and properties from third parties for use in our Multipath Movies. We
cannot be certain that we will be able to do so. Other factors that influence
our ability to generate revenues from our Multipath Movies include:
o consumer reluctance to initiate time consuming downloads of data
necessary to view our products;
o our marketing strategies;
o the quality of our products and competing products;
o our ability to enter into revenue share agreements with third party
web sites;
o critical reviews; and
o the availability of alternative forms of entertainment and leisure
time activities.
WE HAVE EXPERIENCED, AND MAY CONTINUE TO EXPERIENCE, REDUCED REVENUES DUE TO
DELAYS IN THE INTRODUCTION AND DISTRIBUTION OF OUR PRODUCTS.
We cannot be certain that we will be able to meet our planned release
dates for our new Multipath Movies. If we cannot release an important new
product or webisodes during the scheduled quarter, our revenues would likely be
reduced in that quarter. In the past, we have experienced significant delays in
our introduction of some new products. For instance, delays in duplication,
packaging and distribution caused our first Multipath Movies, CYBERSWINE, POPEYE
AND THE QUEST FOR THE WOOLLY MAMMOTH, NIGHT OF THE WEREWOLF and the HALLOWEEN
PARTY to begin arriving at retailers at the end of December 1997, after the 1997
holiday selling season. Similarly, we experienced distribution delays in the
fourth quarter of 1998 that caused our products to reach retail shelves only at
the end of December, after the 1998 holiday selling season. As a result, we
experienced fewer sales of these products than we would have if the products
were in stores during the holiday selling seasons, which had a materially
adverse effect on our operating results for the 1997 and 1998 fourth quarters.
It is likely in the future that delays will continue to occur and that some new
products will not be released in accordance with our internal development
schedule or the expectations of public market analysts and investors.
WE MAY NOT BE ABLE TO GENERATE SIGNIFICANT DEMAND FOR OUR PRODUCTS VIEWED ON
THE INTERNET UNLESS THERE IS A REDUCTION IN THE TIME IT TAKES TO DOWNLOAD
THE LARGE AMOUNTS OF DATA NECESSARY TO VIEW OUR PRODUCTS ON THE INTERNET.
Our revenue growth depends in part on our ability to distribute our
products for viewing on the Internet. We believe that without reductions in the
time to download Multipath Movies over the Internet, our Multipath Movies may be
unable to gain consumer acceptance. This reduction in download time depends in
part upon advances in compression technology. We have previously experienced
delays in the development of compression technologies, which, we believe,
materially and adversely affected our online sales and results of operations. We
believe that large, time-consuming downloads have previously deterred potential
users of our products and have reduced the effectiveness of our marketing
campaigns at that time. The development of these technologies continues to be a
significant component of our business strategy and a primary focus of our
research and development efforts.
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IF WE ARE UNABLE TO RAISE ADDITIONAL FUNDS, WE MAY BE REQUIRED TO DEFER
COMPLETION OF MULTIPATH MOVIE TITLES AND REDUCE OVERHEAD SIGNIFICANTLY.
We believe that our existing funds, cash generated from operations and
proceeds from our future sales of common stock to St. Annes Investments, Ltd.
under the securities purchase agreement we entered into with St. Annes in March
1999 will be sufficient to fund our working capital requirements for at least
the next twelve months. After that period, we may need to raise additional funds
through debt or equity financing or by other means. We cannot be certain that
additional financing will be available at the time we need additional funds or
that, if available, it can be obtained on terms that we deem favorable. If
necessary funds are not available, we may be required to defer completion of
Multipath Movie titles and reduce overhead significantly, which could have a
material adverse effect on our business. Additionally, our stockholders may be
diluted if we raise additional funds through the sale of our stock.
THIRD PARTY WEB SITES AND THE LICENSORS FROM WHOM WE OBTAIN RIGHTS TO OUR
STORIES AND CHARACTERS MAY CAUSE THE DELAY OF THE RELEASE OF OUR PRODUCTS,
WHICH MAY RESULT IN LOWER REVENUES THAN ANTICIPATED.
Our distribution relationships with third party web sites and our
licensing arrangements with companies that own the stories or characters used in
many of our Multipath Movies, contain potentially burdensome provisions. These
provisions may affect our ability to release our products, which would adversely
affect our revenues, for a number of reasons, such as:
o A software distributor or a licensor of a story or character may, in
the exercise of its product approval rights, arbitrarily require
expensive and time consuming changes to our products, which may cause
a delay in the release of the products; and
o A third party web site could delay the inclusion of our content on the
site, and thereby cause a delay in distribution.
WE MAY NOT BE ABLE TO LICENSE STORIES AND CHARACTERS THAT APPEAL TO CONSUMERS
FOR USE IN OUR MULTIPATH MOVIES, WHICH IS NECESSARY FOR OUR MULTIPATH MOVIES
TO HAVE APPEAL IN THE MARKET.
We use stories and characters developed by third parties in our
Multipath Movies. If we cannot license stories and characters that appeal to
consumers at prices or upon terms or conditions that we consider acceptable, we
may not be able to develop Multipath Movies that consumers will watch. To have
access to appealing stories and characters for use in our Multipath Movies, we
will need to continue to develop new relationships and maintain existing
relationships with the licensors of these stories and characters. Many licensors
are reluctant to grant broad licenses covering multiple formats, like the
Internet and television, to companies without a proven track record in the
particular industry. When rights are available, there is often significant
competition for licenses.
IF THE VENDOR WE USE TO DELIVER MULTIPATH MOVIES THROUGH OUR INTERNET SITE
EXPERIENCES AN INTERRUPTION IN SERVICE, WE WILL NOT BE ABLE TO DELIVER
MOVIES THROUGH OUR INTERNET SITE UNTIL SERVICE RESUMES.
We presently use a single vendor to deliver Multipath Movies through
our Internet site. Any significant interruption in service provided by this
vendor could interrupt sales and delivery of Multipath Movies and adversely
affect our ability to conduct this portion of our business and maintain customer
satisfaction.
IF WE CANNOT OBTAIN CD-ROM AND DVD MANUFACTURING AND PACKAGING SERVICES ON A
TIMELY BASIS, WE MAY NOT BE ABLE TO TIMELY DELIVER OUR CD-ROM AND DVD
PRODUCTS TO DISTRIBUTORS AND RETAILERS AND OUR SALES WILL BE ADVERSELY
AFFECTED.
We use third party vendors to press CD-ROM and DVD disks, assemble
purchased product components, print product packaging and user manuals and
package finished products in connection with the retail distribution of our
Multipath Movies. We do not have contractual agreements with any of our third
party vendors, which may result in our inability to secure adequate services in
a timely manner. If we cannot obtain adequate manufacturing services, we will
not be able to timely produce and deliver our CD-ROM and DVD products to
distributors and retail stores for ultimate sale to consumers, which will
adversely affect our sales and operating results.
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IF WE ARE UNABLE TO DEVELOP A RETAIL SALES CHANNEL, EFFECTIVELY COMPETE FOR
RETAIL SHELF SPACE AND NEGOTIATE FAVORABLE TERMS WITH RETAILERS, OUR RETAIL
SALES AND OPERATING RESULTS WILL BE ADVERSELY AFFECTED.
We anticipate that a certain amount of Multipath Movies will be made by
traditional retailers. We may not be able to achieve retail sales at prices
favorable to us. We have no prior experience in developing or managing a retail
sales channel or selling products in retail stores. We are currently expending
resources to develop a retail sales channel, which expenditures must be made
before we realize any significant retail sales. The competition for shelf space
in retail stores is intense. We expect that our products will constitute a small
percentage of a retailer's sales volume, and we cannot be certain that retailers
will provide our products with adequate levels of shelf space and promotional
support. Due to the increased competition for limited retail shelf space and
promotional resources, retailers and distributors increasingly are in a better
position to negotiate favorable terms of sale, including terms relating to price
discounts, product return rights and cooperative market development funds.
Increased competition could result in loss of shelf space for our products at
retail stores, as well as significant price competition, any of which could
adversely affect our sales volume and the price we receive for our products.
WE MAY ENCOUNTER PROBLEMS IN CONNECTION WITH OUR ACQUISITION OF THE AUCTION
CHANNEL, WHICH MAY INCREASE THE COSTS OF THE ACQUISITION AND DISTRACT
MANAGEMENT'S ATTENTION FROM OPERATING THE COMBINED BUSINESS.
In July 1999, we acquired Trojan Television Limited, a London-based
company doing business as The Auction Channel. The Auction Channel 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. We have very little experience in
acquiring businesses and will likely encounter difficulties in integrating The
Auction Channel's operations with our existing operations, which may result in
unexpected costs and adversely affect our operating results. In addition, the
integration will require the dedication of management resources, which may
temporarily distract management's attention from the day-to-day operations of
the two companies and adversely affect our operating results. Some of the
difficulties we expect to encounter include, among others, those related to:
o integrating Brilliant's and The Auction Channel's management staffs;
o retaining The Auction Channel's key management and technical
personnel; and
o coordinating the operation of geographically separated organizations
with distinct cultures.
THE AUCTION CHANNEL MAY NEVER BE PROFITABLE, WHICH WILL ADVERSELY AFFECT OUR
CONSOLIDATED OPERATIONS.
The Auction Channel commenced operations in July 1996 and, accordingly,
has a limited operating history upon which to evaluate its future prospects.
There can be no assurance that The Auction Channel will achieve profitability or
implement its business strategy. The Auction Channel had net losses of
approximately $310,000 in fiscal 1997, $485,000 in fiscal 1998, $1,978,000 for
the fiscal year ended June 30, 1999 and $958,000 for the six months ended
December 31, 1999, and an accumulated deficit of $3,731,000 as of December 31,
1999 relating to net losses from the period from July 1, 1996 through December
31, 1999. We expect that The Auction Channel will continue to sustain losses at
least for the next twelve months.
IF THE AUCTION CHANNEL LOSES ITS LICENSE TO THE COMPUTER SOFTWARE AND HARDWARE
TECHNOLOGIES IT USES IN ITS BUSINESS, THE AUCTION CHANNEL MAY NOT BE ABLE TO
CONTINUE TO SELL ITS PRODUCTS AND SERVICES.
Many of the underlying computer software and hardware technologies used
by The Auction Channel are licensed from Articulate UK Limited. The Auction
Channel has, with respect to these technologies, a worldwide license, with
rights to exploit and improve the software, patents, technology, documentation
and know how developed or owned or licensable by Articulate UK. If The Auction
Channel loses its rights to the computer software and hardware technologies it
licenses from Articulate UK as a result of a dispute with Articulate UK or
otherwise, The Auction Channel will not be able to continue to sell its products
and services. If this occurs, The Auction Channel's revenues will be
substantially reduced.
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PRODUCT RETURNS THAT EXCEED OUR ANTICIPATED RESERVES COULD RESULT IN WORSE THAN
EXPECTED OPERATING RESULTS.
At the time we ship our products to retailers we will establish
reserves, including reserves that estimate the potential for future product
returns. Product returns or price protection concessions that exceed our
reserves could increase the magnitude of quarterly fluctuations in our operating
and financial results. Furthermore, if we incorrectly assess the
creditworthiness of customers who receive our products on credit, we could be
required to significantly increase the reserves previously established. We
cannot be certain that any future write-offs will not occur or that amounts
written off will not have a material adverse effect on our business and depress
the market price of our common stock. Actual returns to date have been within
management's estimates.
FLUCTUATIONS IN OPERATING RESULTS MAY RESULT IN UNEXPECTED REDUCTIONS IN REVENUE
AND STOCK PRICE VOLATILITY.
We operate in an industry that is subject to significant fluctuations
in operating results from quarter to quarter, which may lead to unexpected
reductions in revenues and stock price volatility. Factors that may influence
our quarterly operating results include:
o the introduction or enhancement of software products and technology by
us and our competitors;
o our ability to produce and distribute retail packaged versions of
Multipath Movies in advance of peak retail selling seasons;
o our ability to create appealing content which will generate
advertising revenue; and
o our ability to enter into revenue share agreements with third party
web sites.
Additionally, a majority of the unit sales for a product typically
occurs in the quarter in which the product is introduced. As a result, our
revenues may increase significantly in a quarter in which a major product
introduction occurs and may decline in following quarters.
IF WE DO NOT IMPROVE OUR SOFTWARE TOOLS TO PRODUCE NEW, MORE ENHANCED MULTIPATH
MOVIES, OUR REVENUES WILL BE ADVERSELY AFFECTED.
The software tools that enable us to create Multipath Movies have been
developed over the past four years. Additional refinement of these tools are
necessary to continue to enhance the Multipath Movie format. If we cannot
develop improvements to these software tools, our Multipath Movies may not
obtain or maintain market acceptance and our revenues will be adversely
affected.
ERRORS OR DEFECTS IN OUR SOFTWARE TOOLS AND PRODUCTS MAY CAUSE A LOSS OF MARKET
ACCEPTANCE AND RESULT IN FEWER SALES OF OUR PRODUCTS.
Our products are complex and may contain undetected errors or defects
when first introduced or as new versions are released. In the past, we have
discovered software errors in some of our new products and enhancements after
their introduction into the market. Because our products are complex, we
anticipate that software errors and defects will be present in new products or
releases in the future. While to date these errors have not been material,
future errors and defects could result in adverse product reviews and a loss of,
or delay in, market acceptance of our products.
TO DEVELOP PRODUCTS THAT CONSUMERS DESIRE, WE MUST MAKE SUBSTANTIAL INVESTMENTS
IN RESEARCH AND DEVELOPMENT TO KEEP UP WITH THE RAPID TECHNOLOGICAL
DEVELOPMENTS THAT ARE TYPICAL IN OUR INDUSTRY.
The entertainment software market and the PC industry are subject to
rapid technological developments. To develop products that consumers desire, we
must continually improve and enhance our existing products and technologies and
develop new products and technologies that incorporate these technological
developments. We cannot be certain that we will have the financial and technical
resources available to make these improvements. We must make these improvements
while remaining competitive in terms of performance and price. This will require
us to make substantial investments in research and development, often times well
in advance of the widespread release of the products in the market and any
revenues these products may generate.
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OUR PROPRIETARY TECHNOLOGY MAY NOT BE ADEQUATELY PROTECTED FROM UNAUTHORIZED USE
BY OTHERS, WHICH COULD INCREASE OUR LITIGATION COSTS AND ADVERSELY AFFECT
OUR SALES.
Our ability to compete with other entertainment software companies
depends in part upon our proprietary technology. Unauthorized use by others of
our proprietary technology could result in an increase in competing products and
a reduction in our sales. We rely on trademark, trade secret and copyright laws
to protect our technology, and require all employees and third-party developers
to sign nondisclosure agreements. We cannot be certain, however, that these
precautions will provide meaningful protection from unauthorized use by others.
We do not copy-protect our software, so it may be possible for unauthorized
third parties to copy our products or to reverse engineer or otherwise obtain
and use information that we regard as proprietary. Our customers may take
inadequate precautions to protect our proprietary information. If we must pursue
litigation in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others, we may not prevail and will likely make substantial
expenditures and divert valuable resources. In addition, many foreign countries'
laws may not protect us from improper use of our proprietary technologies
overseas. We may not have adequate remedies if our proprietary rights are
breached or our trade secrets are disclosed.
IF OUR PRODUCTS INFRINGE ANY PROPRIETARY RIGHTS OF OTHERS, A LAWSUIT MAY BE
BROUGHT AGAINST US THAT COULD REQUIRE US TO PAY LARGE LEGAL EXPENSES AND
JUDGMENTS AND REDESIGN OR DISCONTINUE SELLING OUR PRODUCT.
We believe that our products, including our software tools, do not
infringe any valid existing proprietary rights of third parties. Any
infringement claims, however, whether or not meritorious, could result in costly
litigation or require us to enter into royalty or licensing agreements. If we
are found to have infringed the proprietary rights of others, we could be
required to pay damages, redesign the products or discontinue their sale. Any of
these outcomes, individually or collectively, could have a material adverse
effect on our business and financial condition.
OUR STOCK PRICE AND TRADING VOLUME FLUCTUATE WIDELY AND MAY CONTINUE TO DO SO IN
THE FUTURE. AS A RESULT, WE MAY EXPERIENCE SIGNIFICANT DECLINES IN OUR STOCK
PRICE.
The market price and trading volume of our common stock, which trades
on the American Stock Exchange, has been subject to substantial volatility,
which is likely to continue. This volatility may result in significant declines
in the price of our common stock. Factors that may cause these fluctuations
include:
o variations in quarterly operating results;
o the gain or loss of significant contracts;
o changes in management;
o announcements of technological innovations or new products by us or
our competitors;
o recommendations by securities industry analysts;
o dilution to existing stockholders resulting from the issuance of
additional shares of common stock; and
o short sales and hedging of our common stock.
Additionally, the stock market has experienced extreme price and
trading volume fluctuations that have affected the market price of securities of
many technology companies. These fluctuations have, at times, been unrelated to
the operating performances of the specific companies whose stock is affected.
The market price and trading volume of our stock may be subject to these
fluctuations.
IF OUR STOCK DOES NOT SUSTAIN A SIGNIFICANT TRADING VOLUME, STOCKHOLDERS MAY BE
UNABLE TO SELL LARGE POSITIONS IN OUR COMMON STOCK.
In the past, our common stock has not experienced significant trading
volume on a consistent basis and has not been actively followed by stock market
analysts. The average trading volume in our common stock may not increase or
sustain its current levels. As a result, we cannot be certain that an adequate
trading market will exist to permit stockholders to sell large positions in our
common stock.
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BECAUSE OUR OFFICERS AND DIRECTORS OWN A SIGNIFICANT PORTION OF OUR COMMON
STOCK, THEY MAY BE ABLE TO INFLUENCE STOCKHOLDER VOTES AND DISCOURAGE OTHERS
FROM ATTEMPTING TO ACQUIRE US.
As of March 10, 2000, our officers and directors owned, in total,
approximately 15% of the outstanding shares of our common stock. As a result,
our officers and directors may be able to exert influence over the outcome of
all matters submitted to a vote of the holders of our common stock, including
the election of our Board of Directors. The voting power of these officers and
directors could also discourage others from seeking to acquire control of us
through the purchase of our common stock, which might depress the price of our
common stock.
WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE PRICE OF
OUR COMMON STOCK.
Our adoption of a stockholders' rights plan, our ability to issue up to
700,000 shares of preferred stock and some provisions of our certificate of
incorporation and bylaws and of Delaware law could make it more difficult for a
third party to make an unsolicited takeover attempt of us. These anti-takeover
measures may depress the price of our common stock by making third parties less
able to acquire us by offering to purchase shares of our stock at a premium to
its market price. Our board of directors can issue up to 700,000 shares of
preferred stock and determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by our stockholders. Our board of directors could issue the preferred
stock with voting, liquidation, dividend and other rights superior to the rights
of our common stock. The rights of holders of our common stock will be subject
to, and may be adversely affected by, the rights of holders of the share
purchase rights and of any preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could make it more
difficult for a third party to acquire a majority of our outstanding voting
stock.
OUR SALE OF SHARES TO ST. ANNES AT A PRICE BELOW THE MARKET PRICE OF OUR COMMON
STOCK WILL HAVE A DILUTIVE IMPACT ON OUR STOCKHOLDERS.
We have entered into a securities purchase agreement with St. Annes
Investments, Ltd. that allows us to sell to St. Annes up to $6,000,000 worth of
shares of our common stock at a discount to the then-prevailing market price of
our common stock. If the market price is $4.00 or less, St. Annes will receive a
discount equal to 14% of the market price, and if the market price is greater
than $4.00, St. Annes will receive a discount equal to 12% of the market price.
Additionally, we have agreed to issue to St. Annes as a fee shares of common
stock having an aggregate market price equal to 2% of the purchase price of the
shares of common stock that are issued and sold to St. Annes under the
securities purchase agreement. Accordingly, the issuance of shares under the
securities purchase agreement will have a dilutive impact on our stockholders.
As a result, our net income or loss per share could be materially impact future
periods, and the market price of our common stock could be materially and
adversely affected. As of March 10, 2000, we have sold 230,075 shares of our
common stock for gross proceeds of $1,000,000. We also have issued 4,049 shares
of our common stock to St. Annes as a fee.
The table below sets forth the number of shares and the percentages of
our common stock that St. Annes would own if we elected to sell the remaining
$5,000,000 worth of stock under the purchase agreement. The share amounts and
the percentages include 234,124 shares already issued to St. Annes under the
securities purchase agreement and shares St. Annes will receive as a fee under
the securities purchase agreement. The share amounts and the percentages are
based on our closing share price of $12.63 on March 10, 2000, and on assumed
closing share prices of $9.47, $6.32 and $3.16, which prices represent a 25%,
50% and 75% decline, respectively, in our March 10, 2000 closing share price.
The percentages are also based on 14,251,626 shares of our common stock
outstanding on March 10, 2000.
Page 9
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE DECLINE IN PERCENTAGE OF
MARCH 10, 2000 CLOSING ASSUMED SHARES OF COMMON OUTSTANDING
PRICE CLOSING PRICE STOCK COMMON STOCK
---------------------- ------------- ---------------- --------------
<S> <C> <C> <C>
-- $12.63 691,908 4.7%
25% $9.47 844,665 5.7%
50% $6.32 1,148,969 7.6%
75% $3.16 2,105,629 13.1%
</TABLE>
WE MAY NOT BE ABLE TO SELL THE ENTIRE $6,000,000 WORTH OF SHARES OF OUR COMMON
STOCK TO ST. ANNES WITHOUT OBTAINING STOCKHOLDER APPROVAL, WHICH MAY REQUIRE
THAT WE SEEK ALTERNATIVE SOURCES OF FINANCING THAT MAY NOT BE AVAILABLE ON
TERMS FAVORABLE TO US.
Under the rules of the American Stock Exchange, we cannot sell to St.
Annes under our securities purchase agreement more than 1,881,800 shares of
common stock unless we obtain stockholder approval of the issuance of shares in
excess of this amount. Accordingly, if the average price at which we sell our
stock to St. Annes under the securities purchase agreement is less than $3.19
per share, we will not be able to sell the entire $6,000,000 worth of shares of
our common stock to St. Annes without first obtaining stockholder approval. If
we are unable to obtain stockholder approval, or if we choose not to pursue
stockholder approval, we may be required to seek alternative sources of
financing to fund our working capital requirements. We cannot guarantee that
additional financing will be available or that, if available, it can be obtained
on terms favorable to our stockholders and us.
DECREASES IN THE PRICE OF OUR COMMON STOCK COULD INCREASE SHORT SALES OF OUR
COMMON STOCK BY THIRD PARTIES, WHICH COULD RESULT IN FURTHER REDUCTIONS IN
THE PRICE OF OUR COMMON STOCK.
Our sales of common stock to St. Annes at a discount to the market
price of our common stock could result in reductions in the market price of our
common stock. Downward pressure on the price of our common stock could encourage
short sales of the stock by third parties. Material amounts of short selling
could place further downward pressure on the market price of the common stock. A
short sale is a sale of stock that is not owned by the seller. The seller
borrows the stock for delivery at the time of the short sale, and buys back the
stock when it is necessary to return the borrowed shares. If the price of the
common stock declines between the time the seller sells the stock and the time
the seller subsequently repurchases the common stock, then the seller sold the
shares for a higher price than he purchased the shares and may realize a profit.
Page 10
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute forward-looking
statements within the meaning of Section 21E of the Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. The words "expect," "estimate,"
"anticipate," "predict," "believe" and similar expressions and variations
thereof are intended to identify forward-looking statements. Such statements
appear in a number of places in this prospectus and include statements regarding
our intent, belief or current expectations regarding our strategies, plans and
objectives, our product release schedules, our ability to design, develop,
manufacture and market products, our intentions with respect to strategic
acquisitions, and the ability of our products to achieve or maintain commercial
acceptance. Any forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those projected in this prospectus, for the reasons, among
others, described in the Risk Factors section beginning on page 4. You should
read the Risk Factors section carefully, and should not place undue reliance on
any forward-looking statements, which speak only as of the date of this
prospectus. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this prospectus or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered by the selling stockholder under this prospectus. We will,
however, receive from St. Annes the purchase price for the shares of common
stock that we sell to St. Annes under the securities purchase agreement. If the
market price of our common stock, as determined under the securities purchase
agreement, is $4.00 or less, the purchase price is equal to 86% of the market
price. If the market price of our common stock is greater than $4.00, the
purchase price is equal to 88% of the market price. We have already received
gross proceeds of $1,000,000 from St. Annes in connection with our sale of
230,075 shares to St. Annes under the securities purchase agreement. We may
receive up to an additional $5,000,000 from St. Annes, depending upon how many
additional shares we sell under the securities purchase agreement. See
"Securities Purchase Agreement." We intend to use all proceeds from the sale of
common stock under the securities purchase agreement for working capital and
general corporate purposes.
Page 11
<PAGE>
SELLING STOCKHOLDER
On March 29, 1999, we entered into a securities purchase agreement with
St. Annes pursuant to which, subject to the satisfaction of conditions, we may
issue and sell, from time to time, up to an aggregate of $6,000,000 of our
common stock to St. Annes.
Until October 2002, we may from time to time and in our sole
discretion, sell (or put) shares of our common stock to St. Annes. The price
that St. Annes will pay for our stock will be at a discount to the market price
of our common stock on the date we deliver a put notice to St. Annes, as
follows:
o If the market price is $4.00 or less, then the price for the shares
shall be 86% of the market price; and
o If the market price is greater than $4.00, then the price shall be 88%
of the market price.
The market price of our common stock, for purposes of calculating the
purchase price under the securities purchase agreement, is the lowest volume
adjusted price during the ten trading days immediately preceding the date that
we deliver a put notice to St. Annes. The volume adjusted price on a trading day
is equal to the total dollar value of all shares of our common stock traded on
the American Stock Exchange on the trading day, divided by the total volume of
our common stock traded on the American Stock Exchange on the trading day.
Some conditions must be satisfied before we can put shares to St.
Annes, including, but not limited to, the following:
o The market price of our common stock may not be less than $1.00 on the
date we deliver a put notice to St. Annes;
o We must sell at least $100,000 of our common stock to St. Annes upon
each put of shares;
o The closing date with respect to any put of shares shall not occur
within 15 business days of any other put closing date;
o Our representations and warranties to St. Annes set forth in the
securities purchase agreement must be accurate as of the date of each
put and we must not be in breach of any of our obligations under the
securities purchase agreement;
o The number of shares of common stock that we put, when added to all
other shares of common stock previously acquired by St. Annes under
the securities purchase agreement and still owned by St. Annes at the
time of the put, shall not exceed 9.99% of our common stock
outstanding on the date of the put notice; and
o The aggregate number of shares of common stock that we may issue and
sell to St. Annes under the securities purchase agreement may not
exceed 1,881,800 shares of common stock unless we obtain stockholder
approval of the issuance of shares in excess of this amount.
We have agreed to put to St. Annes at least $1,000,000 of our common
stock during the 36 month term of the securities purchase agreement.
We have agreed to pay to St. Annes a cash fee equal to 3% of the
purchase price paid to us by St. Annes at any put closing, and issue to St.Annes
shares of common stock having an aggregate market price equal to 2% of the
purchase price paid to us by St. Annes at any put closing.
On January 31, 2000, we issued our first put notice to St. Annes
Investments, Ltd., under the securities purchase agreement dated March 29, 1999
discussed above. By delivering this notice to St. Annes, we elected to sell
$1,000,000 in aggregate traded value of our common stock to St. Annes under the
pricing formula set forth in the securities purchase agreement. On February 2,
2000, St. Annes purchased 230,075 shares of our common stock at a purchase price
of $4.94 per share. This purchase resulted in aggregate proceeds of $970,000
paid to us on February 2, 2000. Additionally, in connection with this sale of
share, we issued 4,049 shares of our common stock to St. Annes as a fee.
We have agreed to register the resale by St. Annes of the shares of
common stock we put to St. Annes under the securities purchase agreement. We
have filed a registration statement, of which this prospectus forms a part, to
satisfy our registration obligation. If the 2,040,000 shares of common stock
included in the registration statement are less than the total number of shares
we actually issue to St. Annes under the securities purchase agreement, we will
file another registration
Page 12
<PAGE>
statement to include these additional shares. We have agreed to prepare and file
amendments and supplements to the registration statement as necessary to keep it
effective as long as registrable securities are outstanding. We have agreed to
bear some expenses, other than any broker discounts and commissions of the
selling stockholders, in connection with the registration statement.
St. Annes and its representatives have the right to review the
registration statement and our records and properties to obtain information
about us and the accuracy of the registration statement and this prospectus.
The securities purchase agreement will automatically terminate on the
earliest of:
o the date on which St. Annes has purchased an aggregate of $6,000,000
of our common stock under the securities purchase agreement;
o 36 months after the effective date of the initial registration
statement filed under the securities purchase agreement; or o June 29,
2002.
SELLING STOCKHOLDER'S TABLE
The following table contains information about the selling
stockholder's beneficial ownership of our common stock as of April 4, 2000. On
April 4, 2000, there were 14,361,626 shares of our common stock outstanding. We
do not know if, when, or in what amounts the selling stockholders will sell
shares of the common stock. Therefore, we cannot estimate how many shares the
selling stockholder will hold after completion of the offering.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
PRIOR TO OFFERING
------------------- NUMBER OF
NAME AND ADDRESS NUMBER PERCENT SHARES OFFERED
------ ------- ---------------
<S> <C> <C> <C>
St. Annes Investmenst, Ltd. (1)........ 0 0% 2,040,000
c/o Dr. Batliner & Partners
Aeulestrasse 74
FI-9490
Vaduz, Liechtenstein
- -------------------------------
<FN>
(1) Under the securities purchase agreement, St. Annes will not be required to
purchase a number of shares of our common stock, which when added to all
other shares previously acquired by St. Annes and still owned by St. Annes
would exceed 9.99% of the number of shares of our common stock outstanding
on the applicable purchase date.
</FN>
</TABLE>
Page 13
<PAGE>
PLAN OF DISTRIBUTION
St. Annes and any of its 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 stockholder may use any one or more of the following methods when
selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of the shares at a stipulated price per share;
o a combination of any of these methods of sale; and
o any other method permitted pursuant to applicable law.
St. Annes is an "underwriter" within the meaning of the Securities Act
of 1933 in connection with its sale of our common stock pursuant to this
prospectus. Broker-dealers who act in connection with the sale of the common
stock may also be deemed to be underwriters. Profits on any resale of the common
stock as a principal by these broker-dealers and any commissions received by the
broker-dealers may be deemed to be underwriting discounts and commissions under
the Securities Act of 1933.
If required, the following information will be disclosed in a
prospectus supplement or, if necessary, an amendment to the registration
statement:
o the names of any of agent, dealer or underwriter;
o the price at which the common stock is to be sold;
o the number of shares of common stock involved; o any applicable
commissions or discounts; and
o other facts material to the transaction.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in a distribution of our common stock may not
simultaneously engage in market making activities with respect to the common
stock for a period beginning when the person becomes a distribution participant
and ending upon the person's completion of participation in a distribution,
including stabilization activities in the common stock to effect covering
transactions, to impose penalty bids or to effect passive market making bids. In
addition and without limiting the foregoing, in connection with transactions in
our common stock, we and the selling stockholder will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, including, without limitation, Rule 10b-5 and, insofar as we and the
selling stockholders are distribution participants, Regulation M and Rules 100,
101, 102, 103, 104 and 105 thereof. All of the foregoing may affect the
marketability of our common stock.
St. Annes has agreed that it will not engage in short sales of our
common stock except during periods of time determined by us when the prohibition
on short sales will not apply.
St. Annes will pay all commissions and some other expenses associated
with their sale of our common stock. We are registering the common stock issued
hereby pursuant to our contractual obligations under the securities purchase
agreement, and we have agreed to pay the costs of registering the shares
hereunder. We have also agreed to pay legal fees incurred by St. Annes up to a
maximum of $7,500. We have agreed to indemnify St. Annes with respect to the
common stock subject to this offering against some types of liabilities,
including, without limitation, some liabilities under the Securities Act of
1933, or, if the indemnity is unavailable, to contribute toward amounts required
to be paid in respect of these liabilities.
Page 14
<PAGE>
As an additional fee, we will pay to St. Annes at each put closing
under the securities purchase agreement cash equal to 3% of the purchase price
we receive from St. Annes at the put closing, and we will issue to St. Annes
common stock with an aggregate market price equal to 2% of the purchase price
paid by St. Annes at the put closing. See "Securities Purchase Agreement."
We will issue the shares of common stock to St. Annes at a discount to
the then current market price of the common stock, as defined in the securities
purchase agreement, as follows:
o If the market price is $4.00 or less, then the price for the shares
shall be 86% of the market price; and
o If the market price is greater than $4.00, then the price shall be 88%
of the market price.
The market price of our common stock, for purposes of calculating the
purchase price under the securities purchase agreement, is the lowest volume
adjusted price during the ten trading days immediately preceding the date that
we deliver a put notice to St. Annes. The volume adjusted price on a trading day
is equal to (i) the total dollar value of all shares of our common stock traded
on the American Stock Exchange on the trading day, divided by (ii) the total
volume of our common stock traded on the American Stock Exchange on the trading
day.
As of March 10, 2000, we have sold 230,075 shares of our common stock
for gross proceeds of $1,000,000. We also have issued 4,049 shares of our common
stock to St. Annes as a fee.
The table below sets forth the number of shares and the percentages of
our common stock that St. Annes would own if we elected to sell the remaining
$5,000,000 worth of stock under the purchase agreement. The share amounts and
the percentages include 234,124 shares already issued to St. Annes under the
securities purchase agreement and shares St. Annes will receive as a fee under
the securities purchase agreement. The share amounts and the percentages are
based on our closing share price of $12.63 on March 10, 2000, and on assumed
closing share prices of $9.47, $6.32 and $3.16, which prices represent a 25%,
50% and 75% decline, respectively, in our March 10, 2000 closing share price.
The percentages are also based on 14,251,626 shares of our common stock
outstanding on March 10, 2000. Under the rules of the American Stock Exchange,
we cannot sell to St. Annes under the purchase agreement more than 1,881,800
shares of common stock unless we obtain stockholder approval of the issuance of
shares in excess of this amount.
<TABLE>
<CAPTION>
PERCENTAGE DECLINE IN PERCENTAGE OF
MARCH 10, 2000 ASSUMED SHARES OF COMMON OUTSTANDING
CLOSING PRICE CLOSING PRICE STOCK COMMON STOCK
- --------------------- ------------- ----------------- -------------
<S> <C> <C> <C>
-- $12.63 691,908 4.7%
25% $9.47 844,665 5.7%
50% $6.32 1,148,969 7.6%
75% $3.16 2,105,629 13.1%
</TABLE>
Page 15
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You can read and
copy these documents at the SEC's Public Reference Room, located at 450 Fifth
Street, NW, Room 1024, Washington D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available on the SEC's website at "http://www.sec.gov." You can
also read our SEC filings at the American Stock Exchange, 86 Trinity Plaza, New
York, New York.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring to those 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 the information in this prospectus.
We incorporate by reference the documents listed below and any future filings
made 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 shares:
o Annual Report on Form 10-KSB for the year ended December 31, 1999.
o Description of our capital stock contained in our Registration
Statement on Form 8-A, filed on October 29, 1996, as amended by our
Registration Statement on Form 8-A/A, filed on November 20, 1996.
This prospectus is part of a registration statement we filed with the
SEC. You may request a copy of the above information incorporated by reference,
at no cost, by writing to or calling:
Michael Ozen
Chief Financial Officer
Brilliant Digital Entertainment, Inc.
6355 Topanga Canyon Boulevard, Suite 120
Woodland Hills, California 91367
(818) 615-1500
LEGAL MATTERS
Troop Steuber Pasich Reddick & Tobey, LLP, Los Angeles, California, has
rendered to Brilliant Digital Entertainment, Inc. a legal opinion as to the
validity of the common stock covered by this prospectus.
EXPERTS
The financial statements of Brilliant Digital Entertainment, Inc. as of
December 31, 1999 and for each of the two years in the period ended December 31,
1999 incorporated in this prospectus by reference to the Annual Report on Form
10-KSB of Brilliant Digital Entertainment, Inc. for the fiscal year ended
December 31, 1999 have been incorporated in this prospectus in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on their
authority as experts in auditing and accounting.
Page 16
<PAGE>
- --------------------------------------------------------------------------------
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have not
authorized anyone else to provide you with different information. The selling
stockholders should not make an offer of these shares in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any supplement to this prospectus is accurate as of any date other
than the date on the cover page of this prospectus or any supplement.
- --------------------------------------------------------------------------------
--------------------
BRILLIANT DIGITAL ENTERTAINMENT, INC.
PROSPECTUS
--------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the offering. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee.
Registration fee - Securities and Exchange Commission..... $ 3,383
American Stock Exchange fee............................... 17,500
Accounting fees and expenses.............................. 5,000
Legal fees and expenses (other than blue sky)............. 21,500
Blue sky fees and expenses, including legal fees.......... --
Printing; stock certificates.............................. 250
Transfer agent and registrar fees......................... 300
Miscellaneous............................................. 500
--------
Total............................................ $48,433
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation and its Bylaws provide
for the indemnification by the Registrant of each director, officer and employee
of the Registrant to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Section 145 of
the Delaware General Corporation Law provides in relevant part that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person 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 such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
The Registrant's Certificate of Incorporation provides that a director
of the Registrant shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director. Section 102(o)(7)
of the Delaware General Corporation Law provides that a provision so limiting
the personal liability of a director shall not eliminate or limit the liability
of a director for, among other things: breach of the duty of loyalty; acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; unlawful payment of dividends; and transactions from which
the director derived an improper personal benefit.
Page II-1
<PAGE>
The Registrant has entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director of the Registrant and
certain officers of the Registrant (the "Indemnitees"). Pursuant to the terms
and conditions of the Indemnity Agreements, the Registrant indemnified each
Indemnitee against any amounts which he or she becomes legally obligated to pay
in connection with any claim against him or her based upon any action or
inaction which he or she may commit, omit or suffer while acting in his or her
capacity as a director and/or officer of the Registrant or its subsidiaries,
provided, however, that Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action, had no reasonable cause
to believe Indemnitee's Conduct was unlawful.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
1.1 Securities Purchase Agreement, dated as of March 29, 1999, between the
Registrant and St. Annes Investments, Ltd. Incorporated by reference
to Exhibit 10.52 to Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
1.2 Registration Rights Agreement, dated as of March 29, 1999, between the
Registrant and St. Annes Investments, Ltd. Incorporated by reference
to Exhibit 10.53 to Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
5.1 Opinion and Consent of Troop Steuber Pasich Reddick & Tobey, LLP.*
23.1 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Troop Steuber Pasich Reddick & Tobey, LLP (included in
Exhibit 5.1).*
24.1 Power of Attorney (included on signature page).*
- ----------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the
Page II-2
<PAGE>
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of the appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Page II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Los
Angeles, State of California, on April 14, 2000.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ MICHAEL OZEN
---------------------------------
Michael Ozen, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer and Chairman April 14, 2000
- --------------------------- of the Board of Directors
Mark Dyne
* President and Director April 14, 2000
- ---------------------------
Kevin Bermeister
/S/ MICHAEL OZEN Chief Financial Officer (Principal Financial April 14, 2000
- --------------------------- and Accounting Officer) and Secretary
Michael Ozen
* Vice President, Operations and Production April 14, 2000
- --------------------------- and Director
Mark Miller
* Director April 14, 2000
- ---------------------------
Diana Maranon
* Director April 14, 2000
- ---------------------------
Ray Musci
* Director April 14, 2000
- ---------------------------
Garth Saloner
* Director April 14, 2000
- ---------------------------
Jeff Scheinrock
</TABLE>
* By: /S/ MICHAEL OZEN
-----------------------
Michael Ozen
As Attorney-In-Fact
Page II-4
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Brilliant Digital Entertainment, Inc.
We hereby consent to the incorporation by reference in this Registration
Statement on post-effective amendment No. 1 to Form SB-2 on Form S-3 of our
report dated March 29, 2000, relating to the financial statements, which appears
in Brilliant Digital Entertainment, Inc.'s Annual Report on Form 10-KSB for the
year ended December 31, 1999. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
April 14, 2000
