As filed with the Securities and Exchange Commission on
, 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
-------------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOOKDIGITAL.COM, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-3655703
(State of Jurisdiction) (Primary Standard Industrial
(I.R.S.
Employee
Classification Code Number) Identification
No.)
65 Broadway
New York, New York 10006
(212) 430-6380
(Address and telephone number of principal executive offices
and principal place of business)
-------------------------------------
Don L. Rose, Chief Executive Officer
Bookdigital.Com, Inc.
65 Broadway
New York, New York 10006
(212) 430-6380
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
Copies of all communications to:
Joel Schonfeld, Esq.
Andrea I. Weinstein, Esq.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, New York 10005
(212) 344-1600/Fax: (212) 480-0717
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
Title of Each
Class of
Securities
Being
Registerred Amount Being
Registered Proposed
Maximum
Offering
Price per Share Proposed
Maximum
Aggregate
Offering
Price Amount of Registration Fee
Common Stock 1,200,000 $10.00 $12,000,000 $3,636.36
Units sold
prior to
offering
consisting of
1 share of
common stock
and 1 warrant 175,200 $10.00 $1,752,000 $530.91
Warrants
(part of
Units) 175,200
Warrants 195,600
Common Stock
underlying
warrants 370,800 $12.00 $4,449,600 $1,348.36
Underwriters
Warrants to
purchase
stock 120,000
Shares of
common stock
underlying
Underwriters
warrants 120,000 $12.00 $1,440,000 $436.36
Additional Shares
of common stock 272,000 $10.00 $ 2,720,000 $824.2
4
Total $22,361,600 $6,776.23
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to 457.
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by items of Form SB-2
<TABLE>
<CAPTION>
Part I Information Required in Prospectus Item No.
<S> <C> <C>
1. Front of Registration Statement Front of
Registration
and Outside Front Cover of Statement and
outside
Prospectus front cover of
Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and
Outside
Front cover Page of
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risks Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary-
Determination of
Offering Price; High
Risk Factors
6. Dilution Dilution
7. Selling Security Holders Selling Security
Holders
8. Plan of Distribution Plan of
Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal
Stockholders
Beneficial Owners and Management
Part I Information Required in Prospectus Caption in
Prospectus
12. Description of Securities Description
of
Securities
13. Interest of Named Experts and Legal
Opinions;
Experts
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification Indemnification
for
Securities
Act Liabilities
15. Organization Within Last Management,
Certain
Five Years Transactions
16. Description of Business Business
17. Management's Discussion and Management's
Discussion
and Analysis or Plan of and Analysis
Operation
18. Description of Property Property
19. Certain Relationships and Related Not Applicable
Transactions
20. Market for Common Stock and Prospectus Summary
Related Stockholder Matters Market for
Registrant's
Common Stock and Related
Stockholders Matters;
Shares Eligible for
Future Sale.
21. Executive Compensation Executive
Compensation
22. Financial Statements Financials
Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
<PAGE>
1,200,000 SHARES OF COMMON STOCK
BOOKDIGITAL.COM, INC.
Bookdigital.com, Inc., a Delaware corporation ("Bookdigital, our we or
us") is offering 1,200,000 shares of common stock . The securities are being
sold by First Madison Securities, Inc., New York, New York, on behalf of
Bookdigital. Prior to this offering, there has been no public market for the
Securities, and there can be no assurance that such a market will develop or
be sustained . See "Risk Factors."
A brief description of our securities can be found under "SUMMARY" in
this prospectus.
This prospectus also relates to a secondary offering of 175,200 units,
each unit consisting of one share of common stock and one warrant to purchase
an additional share of common stock, and an additional 272,000 shares of
common stock, and 195,600 warrants.
WE URGE YOU TO READ THE 'RISK FACTORS" SECTION BEGINNING ON PAGE ___
ALONG WITH THIS PROSPECTUS BEFORE YOU MAKE YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
Per Share Total
Initial public offering price.................................... $
Underwriting discounts and commissions...............
Proceeds (1)..........................................................
The shares are being offered by First Madison Securities, Inc. subject
to receipt and acceptance by First Madison, Inc. and subject to its right to
reject any order in whole or in part.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT DISTRIBUTE THESE SHARES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT A SOLICITATION OF AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
FIRST MADISON SECURITIES, INC.
The date of this prospectus is .
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary
Selected Financial Data
Risks Factors
Use of Proceeds
Capitalization
Dilution
Management's Discussion and Analysis of Financial Condition
Business
Management
Principal Shareholders
Description of Securities
Shares Eligible for Future Sale
Underwriting
Legal Matters
Experts
Index to Financial Statements
Information contained at Bookdigital's website, www.Bookdigital.com, does not
constitute a part of this prospectus.
We are not currently a reporting company under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and therefore we have
not filed any reports with the Securities and Exchange Commission
("Commission"). Upon completion of this offering we intend to register under
the Securities Act, and to furnish to our security holders annual reports
containing audited financial statements reported on by independent auditors,
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year by electronic delivery on our Web site at
www.Bookdigital.com.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with the more detailed information including "Risk
Factors" and financial statements and the notes relating thereto, which appear
elsewhere in this Prospectus. The discussion in this Prospectus contains
certain forward-looking statements. The outcome of events described in such
forward-looking statements is subject to risks and uncertainties.
Bookdigital's actual results may differ materially from those discussed in
such forward-looking statements. Factors that may cause or contribute to such
differences include those discussed in "Risk Factors," "Management's
Discussion And Analysis" and "Business" as well as those discussed elsewhere
in this Prospectus.
BOOKDIGITAL.COM, INC.
Bookdigital is a development stage company which provides electronic
access to books and other reference material on the Internet. We provide such
books and materials through our web site, www.Bookdigital.com. All our
material is provided in a readily accessible, convenient and user friendly
format.
Our goal is to become a one-stop e-library reference source. We believe
that we can provide a valuable tool for people conducting research via the
Internet by collecting all available reference material on numerous subjects
and allowing viewers to access it through a single web site. We have designed
our web site so that a viewer will not have to utilize various search engines
on the Internet when performing research or trying to locate a single book.
By logging onto www.Bookdigital.com, a person will be able to quickly and
efficiently access the most pertinent reference material available on a
particular subject and then access or download it onto his/her hard drive or
print a hard copy. Books and other reference materials are categorized in a
user friendly format, further simplifying research. Viewers may search by
title, subject or author. We believe that the Internet is providing users
with the opportunity for easier and more up to date research, and it will
become increasingly acceptable as a means of research. We expect that the
following categories of people, among others, will find Bookdigital's web site
an important reference and data source:
Professionals
Students
Lawyers
Scientists
Medical Professionals
Anyone seeking knowledge.
Bookdigital.com seeks to become the premier on-line source for reference
books and data by :
Offering easy access to a wide variety of reference materials in many
subject areas
Providing the service initially for free, and then at low cost
Continuing to expand access to updated reference books and materials
Marketing our service and engaging in cross-marketing with complementary
companies and services
Developing strategic alliances with other web sites and content
providers
Pursuing acquisitions, joint ventures and similar strategic investments
and relationships with complementary businesses and companies.
Investing in technology to further develop state of the art product and
services.
We will charge an annual fee for unlimited use of our on-line research
library. In addition, we are in the process of developing certain categories
within our e-library, for which we will charge an additional monthly fee. The
first of these planned categories is law. We intend to furnish our law e-
library with current court decisions, rulings and laws in all areas of the
law, both State and Federal.
The principal executive offices of Bookdigital are located at 65
Broadway, New York, New York 10006. Our phone number is 212-430-6380. Our
web site is located at www.Bookdigital.com. Nothing contained on our web site
should be construed as part of this Prospectus.
This Prospectus includes statistical data regarding the Internet
industry. Such data is taken or derived from information published by sources
including the Wall Street Journal, Jupiter Research, Visa International
Studies and Ziff-Davis Marketing Intelligence. Although we believe that such
data is generally indicative of the matters reflected therein, such data may
be imprecise and investors are cautioned not to place undue reliance on such
data.
THE OFFERING
SECURITIES OFFERED............................................... 1,200,000
Shares of Common Stock.
See "Description of Securities."
SHARES OF COMMON STOCK
OUTSTANDING BEFORE OFFERING................... 5,175,200(1)
SHARES OF COMMON STOCK
OUTSTANDING AFTER OFFERING...................... 6,375,200(1)
__________
(1) Excluding shares issuable upon exercise of 370,800 outstanding warrants.
RISK FACTORS....
The securities offered hereby are highly speculative and involve a high
degree of risk. Carefully review and consider the factors set forth under
"Risk Factors" as well as all other information contained herein.
USE OF PROCEEDS:
The net proceeds from this offering, estimated to be approximately
$10,440,000, will be used to expand sales and marketing activity, further
develop the law, medical and engineering e-libraries purchase hardware and
software and for working capital and general corporate purposes. For more
information, please refer to "Use of Proceeds" on page .
DETERMINATION OF OFFERING PRICE
The offering price of the common stock will be arbitrarily determined by
Bookdigital and the Underwriters. This price bears no relation to our assets,
book value, or any other customary investment criteria, including our prior
operating history. Among factors we considered in determining the offering
price were estimates of Bookdigital's business potential, our financial
resources, the amount of equity and control desired to be retained by the
present shareholders, the amount of dilution to public investors and the
general condition of the securities markets. (See "Determination of Offering
Price" and "High Risk Factors.")
SELECTED FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
NET REVENUES $ 0
OPERATING EXPENSES
Sales and Marketing 52,000
General and Administrative 36,354
Interest Expense 360
88,714
LOSS FROM OPERATIONS (88,714)
OTHER INCOME 70,278
NET LOSS $18,436
NET LOSS PER SHARE (.00)
WEIGHT AVERAGE SHARES USED IN COMPUTING NET
LOSS PER SHARE 5,175,200
RISK FACTORS
An investment in the shares involves a high degree of risk. You should
consider very carefully certain risks and speculative factors inherent in and
affecting the business of Bookdigital prior to the purchase of shares of our
common stock. In addition to historical information, the information in this
prospectus contains "forward looking" statements about our future business and
performance. Our actual operating results and financial performance may be
very different from what we expect as of the date of the prospectus. The
risks below address some of the factors that may affect our future operating
results and financial performance.
WE HAVE LIMITED OPERATING HISTORY; WE ANTICIPATE FUTURE LOSSES.
Bookdigital.com, Inc. was incorporated on March 25, 1999 pursuant to the
laws of the State of Delaware. To date, Bookdigital has generated limited
revenues. Since incorporating, we have devoted our efforts to various
organizational activities, including our effort to build our web site and
conduct a private placement in which we raised gross proceeds of $963,600. As
a result, we have only a limited operating history upon which you can evaluate
Bookdigital. Our business must be considered in light of the risks, expenses
and problems frequently encountered by companies in their early stages of
development, particulary companies in new and rapidly evolving markets such as
online commerce and the Internet. Set forth below is a brief summary of
risks, expenses and problems frequently encountered by companies such as
Bookdigital:
(i) Our inability to develop, maintain and /or
increase levels of traffic on the Bookdigital
site; the failure by us to develop the
Bookdigital brand; our inability to attract or
retain viewers; our inability to generate
significant Web-based commerce revenue from our
subsidiaries; our inability to generate
significant advertising revenues; our failure to
anticipate and adapt to a developing market; and
the level of use of the Internet and online
services for the purchase of consumer products
and services.
(ii) Bookdigital's ability to upgrade and develop a
system and infrastructure and ability to attract
new personnel in a timely and effective manner;
the inability to effectively manage rapidly
expanding operations; the level of traffic on
our web site; the failure of related servers and
networking systems to efficiently handle our web
traffic; technical difficulties and system
downtime or Internet brownouts; and the amount
and timing of operating costs and capital
expenditures relating to expansion of our
business, operations and infrastructure.
(iii) Bookdigital's competition and dependence on the
Internet; the introduction and development of
different or more extensive networks by direct
and indirect competitors, particularly in light
of the fact that most of such competitors are
much larger and have greater financial,
technical and marketing resources than
Bookdigital.
(iv) Governmental regulation and general economic
conditions specific to the Internet and the
online commerce industry.
To address these risks, Bookdigital must, among other things, develop,
maintain and increase its subscriber base, continue to develop and upgrade its
technology, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance we will be successful
in addressing such risks, and any failure to do so could have a material
adverse effect on our business, result of operations and financial condition.
As of May 31, 1999 Bookdigital, had an accumulated net deficit of
18,436, and we anticipate that we will incur net losses for the foreseeable
future. The extent of these losses will be dependent, in part, on our ability
to attract and build a membership base, to generate sales and advertising
revenues, and to offer products and services at competitive prices. We expect
our operating expenses to increase, especially in the areas of sales and
marketing and brand promotion, and, as a result, we will need to commence
operations and generate revenue, and to offer products and services at
competitive prices if profitability is to be achieved. Although we intend to
develop our marketing of services, no assurance can be given that we will be
able to achieve this objective or that, if this objective is achieved, we will
ever be profitable. To the extent that net revenue does not grow at
anticipated rates, or that increases in operating expenses are not followed by
commensurate increases in net revenue, or that we are unable to adjust
operating expense levels accordingly, Bookdigital's business, results of
operations and financial condition will be materially and adversely affected.
There can be no assurance that our operating losses will not increase in the
future or that we will ever achieve or sustain profitability. The
establishment of our operations is contingent upon our success in establishing
markets for our products and services and achieving profitable operations.
Our future operating results may be difficult to predict.
Because of our very limited operating history and early stage of
development, we do not have historical financial data on which we, you or
market analysts can plan or base forecasts of revenues, earnings or capital
requirements with accuracy. Because the Internet is relatively new, both we
and others will find it difficult to make predictions about our financial
performance based on the performance of other companies. One result of this
unpredictability may be that we will experience unanticipated capital
requirements at a time when the required capital is not available to us or is
only available on terms that will dilute your investment. Another possible
result is that our stock price may experience rapid and significant
fluctuations as our financial performance exceeds or falls short of market
expectations.
We run the risks of capacity constraints; systems failures; technological
risks.
The performance of our server and networking hardware and software
infrastructure is critical to our business and our ability to attract Web
users and new viewers to Bookdigital's Web site. Any system failure that
causes an interruption in service or decreased responsiveness of our Web site
could impair our ability to attract and retain members. Any disruption in
Internet access or any failure to our server and networking systems to access
information would have a material adverse effect on our business, result of
operations and financial condition. Despite our implementation of network
security measures, our servers will be vulnerable to computer viruses, break-
ins, and similar disruptions from unauthorized tampering.
We and our subscribers face security risks.
Despite the implementation of security measures, our networks may be
vulnerable to unauthorized access, computer viruses and other problems. A
person who is able to circumvent security ,measures could misappropriate
proprietary information or cause interruptions in our operations. Various Web
sites and Internet service providers have experienced, and our Web sites may
experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
We may be required to spend significant amounts to protect against the threat
of security breaches or to alleviate problems caused by such breaches.
Although we intend to implement industry-standard security measures, these
measures may be circumvented. Eliminating computer viruses and alleviating
other security problems may require service interruptions or unanticipated
expense.
We may be unable to manage our growth.
Our business plan requires significant expansion of our operations to
address potential market opportunities. We expect we will need to increase
personnel, including key management personnel, and other resources
significantly in the near future. We expect this growth to place a
significant strain on our managerial, operational and financial resources and
systems. To manage our growth, we must implement, improve and effectively use
our operational, management, marketing and financial systems and train and
manage our new and existing employees. We cannot guarantee we will be able to
manage effectively the expansion of our operations or that our personnel,
systems, procedures and controls will be adequate to meet our anticipated
future operations.
Limited operating history
We were incorporated in March 1999, and have been involved with
designing and implementing our web site, and raising funds since that time.
We have made our Web site available to our customer since April 1999, but have
not charged any subscription fees. Many of our visitors have not yet had an
opportunity to fully evaluate the benefit of using our web site. Our ability
to retain our current visitors and to attract others will depend on the
performance of our visitors using our web site especially over the next few
months.
The future of the Internet as a commercial medium is uncertain
Rapid growth in use of and interest in the Internet is a recent
phenomenon. Neither we nor others can predict with confidence whether
acceptance and use of the Internet will continue to develop or whether a
sufficient base of users will emerge to support our business. The Internet
may not be accepted as a viable commercial medium for any of a number of
reasons, including:
inadequate development of the necessary infrastructure;
inadequate development of enabling technologies; and
inadequate consumer support for e-commerce generally or in our targeted
market areas.
If the Internet continues to experience an increase in users, an
increase in frequency of use or an increase in the bandwidth requirements of
users, the Internet infrastructure may be unable to support the demands placed
upon it, specifically the demands of delivering the high volume of data
necessary for the optimum performance of our Web site. The Internet could
lose its viability as a commercial medium due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity, or due to increased government regulation. Changes in or
insufficient availability of telecommunications services to support the
Internet also could result in unacceptable response times and could adversely
affect use of the Internet generally and of our Web site in particular.
We will not collect sales tax.
We do not intend to collect sales or other similar taxes in respect to
sales of subscriptions. One or more states may seek to impose sales tax
collection obligations on an out-of-state company such as Bookdigital which
engages in online commerce. A successful assertion by one or more states that
we should collect sales or other similar taxes on the sale of merchandise
could have a material adverse effect on our business, prospects, financial
condition and results of operations.
We depend on key personnel, the loss of whom could have a material adverse
effect on our business.
Our success will be substantially dependent on the performance of our
executive officers, Zahra S. Yamani (President), Don L. Rose (CEO), and Susan
L. Schuler (Secretary), who have worked together only a short period of time,
and on the marketing personnel we intend to hire. The loss of the services of
any of our executive officers could have a material adverse effect on our
business, results of operations and financial condition. Competition for
senior management, experienced media sales and marketing personnel, qualified
Web engineers and other employees is intense, and there can be no assurance
that we will be successful in attracting and retaining such personnel. Our
failure to successfully manage our personnel requirements would have a
material adverse effect on our business, results of operations and financial
operations and financial condition. We currently have no Key-Person life
insurance on any of our executive officers. We have entered into employment
agreements with Zahra Yamani, our President, Don L. Rose, our CEO, and Susan
L. Schueler, our Secretary.
We expect to face intense competition.
The market for electronic commerce networks on the Internet is new and
rapidly evolving, and competition for members, consumers, visitors and vendors
is intense and is expected to increase significantly in the future. Barriers
to entry are relatively insubstantial. We believe that the principal
competitive factors for companies seeking to create electronic commerce
networks on the Internet are critical mass, functionality, brand recognition
and member affinity and loyalty. We could also face competition in the future
from Web directories, search engines, content sites, commercial online service
providers, sites maintained by Internet service providers, traditional media
companies and other entities that attempt to or establish electronic commerce
networks on the Internet by developing their own community or acquiring one of
our competitors. There can be no assurance that our competitors and potential
competitors will not develop electronic commerce networks that are equal or
superior to ours or that achieve greater market acceptance than our Consumer
Network.
Most of our existing and potential competitors have longer operating
histories in the Web market, name recognition, large customer bases and
significantly greater financial, technical and marketing resources.
Competitors are able to undertake more extensive marketing campaigns for their
brands and services, adopt more aggressive advertising pricing policies and
make more attractive offers to potential employees, users and advertises. Our
competitors may be perceived by advertisers as having more desirable Web site
for placement of their ads. In addition, we expect our advertisers will have
established collaborative relationships with certain of our competitors or
potential competitors , and other high-traffic Web sites. Therefore, there
can be no assurance that we will be able to grow our subscription base,
traffic levels and advertiser base to the extent necessary to generate
sufficient net revenues to successfully operate our business; that competitors
will not experience greater growth in traffic than Bookdigital as a result of
such relationships, which could have the effect of making their Web sites more
attractive to advertisers; or that advertisers will not elect not to renew
their relationships with Bookdigital. There can also be no assurance we will
be able to compete successfully against our current or future competitors or
that competition will not have a material adverse effect on our business,
results of operations and financial condition. See "Business Competition."
We have only limited ability to protect our intellectual property and to avoid
infringing intellectual property rights of others.
We regard our technology such as site content, graphics and domain name
as proprietary, and will attempt to protect it by relying on trademark,
service mark and trade secret laws and other methods. We also intend to enter
into confidentiality agreements with our employees and consultants. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use our proprietary information without authorization or to develop
similar technology independently.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving , and no assurance can be given as to the future
viability or value of any proprietary rights of Bookdigital. We can not be
certain that the steps we take have prevented or will prevent misappropriation
or infringement of our proprietary information. Any such infringement or
misappropriation, should it occur, might have a material adverse effect on our
business, results of operations and financial condition.
There can be no assurance that our business activities will not or have
not infringed upon the proprietary rights of others, or that other parties
will not assert infringement claims against Bookdigital. Such claims and any
resultant litigation, should it occur, might subject Bookdigital to
significant liability for damages and might result in invalidation of
Bookdigital's proprietary rights, and even if not meritorious, could be time
consuming, expensive to defend, and result in the diversion of management time
and attention, any of which might have a material adverse effect on our
business, results of operations and financial condition.
Further, we have taken all necessary precautions to ensure that all
material available on Bookdigital's Web site is not subject to any copyrights,
and may be accessed fully by the public without risk of copyright
infringement. However, we can not guarantee that such effects have been
successful and that we will not be liable for copyright infringement.
Government regulation of the Internet is new and its future is uncertain.
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to business generally, and there are
currently few laws or regulations directly applicable to access to commerce on
the Internet, a number of legislative and regulatory proposals are under
consideration by federal, state, local governmental organizations, and it is
possible that a number of laws or regulations may be adopted with respect to
the Internet relating to such issues as user privacy, taxation, infringement,
pricing, quality, of products and services and intellectual property
ownership. The adoption of any such laws or regulations may decrease the
growth in the use of the Internet, which could in turn decrease the demand for
our community, increase our cost of doing business, or otherwise have a
material adverse effect on our business, results of operations and financial
condition. The applicability to the Internet of existing laws governing
issues such as property ownership, copyright, trademark, trade secret,
obscenity, libel and personal privacy is uncertain and developing. Any new
legislation or regulation, or applicable or interpretation of existing laws,
could have a material adverse effect on our business, results of operations
and financial condition. Government legislation could hamper the growth in
use of the Web generally and decrease the acceptance of the Web as a
communications and commercial medium, and could, thereby, have a material
adverse effect on our business, results of operations and financial condition.
In addition, a number of proposals have been made at the federal, state and
local level that would impose additional taxes on the sale of goods and
services over the Internet, and certain states have taken measures to tax
Internet-related activities.
Because materials may be downloaded by members and other users of our
Web site, and subsequently distributed to others, there is the potential that
claims will be made against Bookdigital for defamation, negligence, copyright
or trademark infringement, personal injury or other damages. Even to the
extent such claims do not result in liability, we could incur significant
costs in investigating and defending such claims. The imposition on
Bookdigital of potential liability for information carried on or disseminated
through our systems could require us to implement measures to reduce our
exposure to such liability, which may require the expenditure of substantial
resources and limit the attractiveness of our services to subscribers and
users. Although we carry general liability insurance, it may not cover all
potential claims to which we are exposed or may not be adequate to indemnify
us for all liability that may be imposed. Any imposition of liability that is
not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on our business, results of operations and financial
issues as a result of these lawsuits and legislative proposals could impact
the overall growth of Internet use.
There has been no prior market for our securities; our securities may
experience price volatility.
Prior to this offering, there has been no public market for our common
stock or other securities. The initial public offering price of the common
stock has been arbitrarily determined by Bookdigital and is not necessarily
related to our assets, book value, results of operations, or any other
established criteria of value. There can be no assurance that an active
trading market for the common stock will develop, or be sustained if developed
following the closing of the Offering.
In addition, the stock market in general and the technology and Internet
sectors in particular, have experienced extreme price and volume fluctuations,
which have affected the market price for many companies in industries similar
or related to that of Bookdigital, and have been unrelated to the operating
performance of these companies. These market fluctuations, as well as general
economic, political and market conditions, may have a material adverse effect
on the market price of our securities. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Such
litigation, if instituted, and irrespective of the outcome of such litigation,
could result in substantial costs and a diversion of management's attention
and resources, and have a material adverse effect on our business, results of
operations and financial condition.
The company expects that it will experience significant fluctuations in
its future quarterly operating results due to a variety of factors, many of
which are outside of Bookdigital's control. Bookdigital believes that factors
that may adversely affect our quarterly operating results include: (i) our
ability to attract new subscribers at a steady rate and maintain subscriber
satisfaction; (ii) Bookdigital's ability to acquire up to date reference
materials and books; (iii) the development, announcement, or introduction of
new sites, services and products by Bookdigital and our competitors; (iv)
price competition; and (v) Bookdigital's ability to upgrade and develop its
systems and infrastructure. Consequently, we believe that period-to-period
comparisons of Bookdigital's operating results will not necessarily be
meaningful and should not be relied upon as any indication of future
performance. Bookdigital's future quarterly operating results from time to
time may not meet the expectations of securities analysts or investors, which
may have a material adverse effect on the market price of the common stock.
Arbitrary Determination of Offering Price.
The initial offering will be arbitrarily determined by Bookdigital and the
Underwriters, and bears no relationship whatsoever to our assets, earnings,
book value or any other objective standard of value. Among the factors we
will consider are the lack of operating history of Bookdigital, the proceeds
to be raised by the offering, the amount of capital to be contributed by the
public in proportion to the amount of stock to be retained by present
stockholders, our relative requirements, and the current market conditions in
the over-the-counter market.
Shares eligible for future sale.
Upon completion of this offering, Bookdigital will have outstanding
6,375,200 shares of common stock, excluding 370,800 shares, issuable upon
exercise outstanding warrants. Of the 6,375,600 issued and outstanding shares
of our common stock, approximately 4,728,000 shares may be deemed "restricted
shares." The restricted shares were issued by Bookdigital in private
transactions in reliance upon one or more exemptions contained in the
Securities Act of 1933. Restricted securities may, in the future, be sold in
compliance with Rule 144 under the Securities Act.
Rule 144 provides that a person holding restricted securities for a
period of one year may sell in brokerage transactions an amount equal to 1% of
our outstanding common stock every three months. A person who is a "non-
affiliate" of Bookdigital and who has held restricted securities for over two
years is not subject to the aforesaid volume limitations as long as the other
conditions of the Rule are met. Possible or actual sales or our common stock
by certain of our present stockholders under Rule 144 may, in the future, have
a depressive effect on the price of our common stock in any market which may
develop for such shares. Such shares would be eligible for sale within one
year under Rule 144 )subject to certain volume restrictions and other
conditions imposed thereby) commencing in March 2000. See "Description of
Capital Stock-Shares Eligible for Future Sale."
Our management will have broad discretion to allocate offering proceeds
Although Bookdigital has generally provided for the use of the proceeds
from this offering, as of the date of this prospectus, we cannot specify with
certainly the amount of the net proceeds of the offering which will be
allocated for each purpose. Accordingly, Bookdigital's management will have
broad discretion in the application of the net proceeds. Holders of
Bookdigital securities may not agree with our allocation of the proceeds of
this offering. See "Use of Proceeds."
We may need, and may be unable to obtain additional financing..
We anticipate that if this entire offering is sold we will have
sufficient capital to meet our needs for working capital and capital
expenditures for at least the next 12 months. After 12 months we may need to
raise additional funds through a private or public offering of our securities
in order to fund our operations while we build our subscriber base. If
additional funds are raised through the issuance of equity or convertible debt
securities, the new holders may have preferences or privileges senior to those
of the rights of Bookdigital's securities. There can be no assurance that
additional capital will be available or available on acceptable terms.
Bookdigital may not be able to fund its future operations, promote our brand
as we desire, take advantage of unanticipated acquisition opportunities,
develop or enhance services or respond to competitive pressures. Any such
inability could have a material adverse effect on our business, results of
operations and financial condition.
We have never declared any dividends.
We have never declared or paid any cash dividends on our capital stock
to date and do not anticipate paying any cash dividends on our common stock in
the foreseeable future.
USE OF PROCEEDS
The net proceeds that we will receive from the sale of the 1,200,000 shares of
common stock are estimated to be approximately $10,440,000, assuming an
initial public offering price of $10.00 per shares, after deducting
underwriting discounts and commissions and estimated offering expenses.
We intend to apply these net proceeds as follows:
Approximate Amount Percentage
of
Of Net Proceeds Net Proceeds
Sales and Marketing 4,000,000 39.1%
Site Development-law, Medical and
Engineering e-libraries 1,600,000 15.6%
Site Development-Reference materials 1,850,000 18.1%
in Spanish, Italian, German, French
Hardware and Software 350,000 3.4%
Working Capital 2,440,000 23.8%
Total 10,440,000 100%
CAPITALIZATION
CAPITALIZATION
The following tables sets forth the capitalization at May 31, 1999 on an
actual basis and as adjusted to give effect to the sale of 1,200,000 units at
an initial public offering price of $10,000 per unit and receipt of the net
proceeds. This table should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus.
<S>
<C> <C> <C>
May 31, 1999
Actual As Adjusted
Short term Debt $ 322,562 $ 322,562
Stockholder's Equity
Common Stock, $.001 par
value, 20,000,000 shares
authorized, 5,175,200
shares issued and
outstanding; 6,375,200
shares issued and
outstanding as adjusted 5,175 6,3755
Paid-in Capital 965,889 12,964,689
Accumulated Deficit 952,628 (18,236)
Total Shareholder's
Equity 952,628 12,952,628
Total Capitalization $1,275,100 13,275,190
</TABLE>
DILUTION
At May 31, 1999, the Company had a net tangible book vale of $952,628 or
approximately $.18 per share of common stock. Net tangible book value per
share is equal to the Company's tangible asset less its total liabilities,
divided by the number of shares of common stock outstanding on such date.
After giving effect to the sale of 1, 200,000 units and the receipt of
estimated net proceeds, assuming an initial offering price of $8.70 (after
deduction of underwriting discounts and commissions), the proforma net
tangible book value at May 31, 1999 would have been $11,392,628 or $1.79 per
share of common stock.
This represents an immediate increase in net tangible book value of $1,62 per
share of common stock to the existing shareholders an immediate dilution of
$8.21 share of common stock to new investors.
The following table illustrates the per share dilution:
Assumed initial offering price $10.00
Net tangible book value per share .17
Increase attributable to new investors 1.62
Adjusted net tangible book value after offering 1.79
Dilution per share to new investors 8.21
Dilution as a percentage of offering price 82%
The following table sets forth on a proforma basis as of May 31, 1999,
including the offering.
Shares
purchased
Number % Total
consideration
Amount % Average Price
Per Share
Existing
Shareholders
5,175,200 81 $ 971,064 9 $ .19
New
Investors
1,200,000 19 10,440,000 91 10.00
Total
6,375,200 100 11,411,064 100
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
The following discussion and analysis provides information that we
believe is relevant to
an assessment and understanding of our results of operations and financial
condition for the two months ended May 31, 1999. The following discussion
should be read in conjunction with the Financial Statements and related Notes
appearing elsewhere in this prospectus.
Overview
Since beginning operations in March 1999, we have devoted substantially
all of our resources to designing and implementing our web site and organizing
and collecting reference materials for our web site. From inception through
May 31, 1999 we raised total equity capital of $963,600 and had an accumulated
deficit of $18,436. We have not yet begun to receive revenues from sales of
services. We except to operate at a loss for the first six to twelve months
following the commencement of sales of our services as we incur increasing
levels of expense to support growth.
We believe that an initial operating loss will not be indicative of
future performance for the following reasons, among others:
The receipt of the proceeds of this offering and their use to fund
our anticipated growth will materially change expense levels in
all major categories and are expected to support substantial
increases in revenues from operations; and
We have recently emerged from the development stage and anticipate
rapid increases in the number and size of site visitors and
advertising revenues.
Although we expect substantial growth in both revenues and expenses, we
anticipate that increases in expenses will occur more rapidly than
corresponding increases in revenues. Also, while we are committed, at least
in the short term, to substantial increases in expenses, we cannot guarantee
that revenues will increase correspondingly. Like many companies attempting
to build an Internet-based business, we expect that for at least the next
year, and for an indeterminate period of time thereafter, to follow a strategy
of establishing market share by making expenditures for marketing and
infrastructure development that exceed current revenues.
Bookdigital
Results of Operations. For the two months ended May 31, 1999, we had
$70,278 in total
revenues, all of which were derived from gain or sales of investments and
interest, and incurred total expenses of $88,714. Expenses consisted of
$12,130 of research and development expenses and $36,224 of general and
administrative expenses. We have incurred organization costs of $152,283.
Liquidity and Capital Resources. We have funded our operations
primarily through
the sale of common stock and warrants. From inception through May 31, 1999,
we raised approximately $963,600 from sales of units for cash. Each unit
consists of one share of common stock and one common stock purchase warrant.
Each warrant is exercisable for one share of common stock at 120% of the
price per share in this offering for a two year period commencing March 30,
1999. In some cases, we have issued common stock in return for goods or
services. As of May 31, 1999, we had a total of $322,561 of outstanding notes
and other obligations for money borrowed, and cash and cash equivalents of
$1,107,107. We have described the effect of this offering on our capital
resources and our anticipated uses of those resources under "Use of Proceeds"
on page ___.
Year 2000 Compliance
There are issues associated with the programming code in existing
computer systems as
the Year 2000 approaches. The "Year 2000 problem" is pervasive and complex,
as virtually every computer operation will be affected in some way by the
rollover of the two digit year value to 00. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. We have evaluated our current systems, purchased necessary upgrades and
believe that our current hardware and software is Year 2000 compliant.
Similarly, we believe that the services we offer to our customers are not
affected by the Year 2000 problem. We have evaluated the potential impact on
us of a Year 2000 problem on the part of our important third party vendors and
have found none. We plan to continue to evaluate our systems and those of our
important vendors in an effort to minimize the effects of a Year 2000 problem.
We do not anticipate that the Year 2000 problem will have a material impact on
our business or operations.
BUSINESS
Bookdigital was incorporated on March 25,1999. Bookdigital provides
access to all types of reference books and materials on the Internet in a
digital format that is both easy to use and easy to read. We also provide
links to other categorized premier sites in the subject area. We seek to
maximize the number of visitors to our web site by providing the best service
and content available in the reference and digital book arena. We currently
have in excess of 10,000 volumes in English for our digital book selection.
We anticipate that our digital library will eventually surpass one million
books, and will consist of books in languages such as English, Spanish,
French, German, Italian, Japanese and Chinese. To access a book or other
reference material, all a viewer has to do is to click on the screen
Bookdigital intends to become the premier e-library and source for
reference and digital books on the Internet. No longer will a person have to
search the Internet via Yahoo, Lycos or some other search engine to find text
dealing with the desired subject. A viewer can go to our Web site, find the
material desired and get instant access to the subject then download an entire
book or series of articles to his/her computer. Bookdigital intends to become
a one-stop reference source. Sources available on our Web site,
www.bookdigital.com, will range from classic literature needed for book
reports (Plato, Mark Twain etc.), to reference materials on law, medicine,
chemistry and more obscure areas such as geophysics. The books and reference
materials are categorized on the web site in an easy to find manner and can be
downloaded from Bookdigital's Web site in a user friendly accessible format.
We have entered into many revenue sharing strategic "alliances" with
complimentary companies such as Dell Computer, Staples, Sharper Image,
Borders, Omaha Steaks, Value America and other vendors. A link is established
with allied companies to transport the user to the desired site. A percentage
of the ensuing sale is the normal compensation.
Bookdigital will also actively seek to acquire complimentary
technologies or companies that will grow or expand our business. Furthermore,
the Company may invest in other Internet companies that meets its objectives.
Products and services
Reference Materials. Bookdigital intends to become the premier
source of reference
material on the Web. We have obtained, and will continue to obtain, reference
material on a variety of subjects, from astrology to zoology. We believe that
compiling a wealth of information on each topic on a single Web site will
offer subscribers an easy, time-efficient and cost efficient way to conduct
research. Currently, most on-line reference materials are scattered through
numerous Web sites. We believe our site is the first Web site to condense and
concentrate reference materials to such a level in a single location. We will
seek to further attract those conducting research, by establishing several sub
super e-libraries, within our main reference e-library. The first sub super
e-library will be our law e-library which we expect will contain up to the
minute court decisions, rulings, laws and regulations, in site and federal
law. If we are successful in developing these sub super e-libraries, we will
then begin to immediately solicit subscribers for those specific subjects in
addition to the general subscriptions.
Subscribers to our sub super e-libraries will be given unlimited use of
our general reference e-library at no additional cost.
Digital Books. Bookdigital will be supplying access to digital books on
our Web site. Books are currently available in English language only. We
intend to expand into additional languages such as Spanish, German, French,
Italian, Japanese and Chinese in the near future. Downloadable books are
creating a new evolution for book publishing by transforming electronic text
and data to digital technology, digital characters, page layout, and
numbering. Some of the advantages of digital books are:
* The user can create an electronic book library on his/her hard drive.
* The user can create personal notes as an attachment to each page with
an option to save and print.
* The user can highlight desired text.
* The user can locate specific words throughout reference materials
and/or literature.
* The user can skim through pages or go directly to a specific page.
* The user can print whole or part of desired text with or without
personal notes.
* The user can magnify (zoom in) text for easier reading.
With these advantages, Bookdigital plans to become the premier Internet
provider of reference books and materials by providing the most multi-lingual
books, and the easiest to use web site. We have thousands of books now, and
plan to acquire at least ninety thousand more over the next year. Many of
these books are of a highly technical nature. We believe that as our book
inventory grows to a critical mass, the name Bookdigital will become
synonymous with digital books, and that we will become the first Web site a
potential customer will visit in the search for reference material. As we
continue to grow, it will reach the point that Bookdigital will be the first
site looked at for any and all books that are needed instantly.
We intend to utilize these advantages to maximum advantage. The key to
successful businesses on the Internet is to become as large and efficient as
possible in an area of specialty. We believe that Bookdigital will have the
largest single library of electronic reference books and materials available.
We will seek to always maintain and improve upon that crucial advantage.
We intend to charge low annual subscription fees for the use of our
reference materials. Additionally, Bookdigital intends to focus on particular
reference areas such as law, medicine and engineering, seeking to become a
single source of reference materials in each such area. We are commencing
with the law section, and anticipate having a full, functioning on-line law
reference library in 2000. We will charge an additional monthly subscription
fee for users of the law service. We hope to have up to date court decisions,
laws and regulations, both state and federal. We expect to compete with
companies such as WestLaw and Lexis/Nexis.
Most of Bookdigital's books are public domain books that have been
formatted in our digital format. After the initial expense of converting the
books into the digital format, the costs of the books is minimal. We will
also seek arrangements with publishers to offer their newest releases for sale
in the digital format. We believe that having some new releases in the
general reading category is a reasonable way to increase traffic. Our costs
to transform the books in the digital format will be similar to our conversion
costs on public domain books, but since these new releases will be charged on
a per-book basis, the profit margin should be sufficient to make this a
profitable supplement. We do not anticipate that this will become a
significant source or revenue. We believe that the primary sources of
revenues for Bookdigital will include, but will not be limited to:
1. Site subscription fees;
2. Advertising on our Web site;
3. Subject specific subscription fees such as law, medicine and engineering;
4. Alliance with other Internet companies such as computer manufacturers,
monitor manufacturers, and modem vendors;
5. Acquisition of complimentary technologies or operating entities to expand
our business.
Advertising. The rapidly increasing number of web users, both in
the United States and
Internationally, have resulted in the emergence of the web as a new mass
medium for advertising. The web is a attractive medium for advertising
because of its interactivity, flexibility, targetability, and measurability.
Advertisers can reach broad audiences and target advertisements to users with
similar demographic characteristics specific regional population or selected
individuals. We intend to solicit advertisers to advertise on our web site.
Currently, we have agreements with over eighty advertisers such as Sharper
Image, 1-800 Flowers, Mothernature.com, GOTO.Com, and Barnesandnoble.com.
These advertisers have agreed to place banner ads on our Web site, and
will give us a portion of any sales generated by such ads. We expect these
fees to comprise a significant portion of Bookdigital's revenues.
Subscriptions. We intend to charge subscribers for our services.
Bookdigital will charge an annual fee for use of Bookdigital's reference e-
library. This subscription fee will permit a user to access Bookdigital's
entire e-library, except for certain super sub categories such as law,
medicine and engineering. Subscribers interested in accessing material and
information contained in those categories will be subject to an additional
monthly fee. We expect to attract lawyers, doctor and other medical
professionals, engineers and students to our Web site.
Internet Market and Business Opportunities
The typical Internet user is an educational, professional or computer-
related individual. The median age is 38, median household income is $59,500
and 64% have graduated college. Obviously, this is a very attractive audience
for advertisers. Further statistics show that the top uses for personnel
accessing the Internet are to gather information (87.9%), E-mail (83.2%) and
to conduct research (80.5%). We have found based upon our surveys that the
people who utilize the Internet for research are in the upper echelon of the
income and educational stratum of Internet users. Furthermore, we will be
able to offer the advertisers prescreened viewers based upon their indicated
interests. These factors should allow Bookdigital to charge higher
advertising rates.
Getting customers to download needed information from the Internet is not a
hurdle for business. According to a new study from International Data Corp.,
over 50% of online business people download information from the Internet
several times a week. Approximately 91% of commercial survey respondents and
81% of consumers use their hard drives for primary storage.
We believe that expanding the capabilities on Bookdigital's Web site to
other languages will give us a significant edge. According to a study
recently released by Global Reach, the fastest- growing group of people online
today doesn't access the Internet in English. Over the last four years, the
number of non-English speaking users has grown from less than 10% to nearly
50% according to Bill Dunlap, author of the Global Reach study. In 1995, only
4 to 5 million out of a total of 40 million users were not English speakers.
Today, approximately 80 to 81 million out of 180-182 million Internet users
are non-English speakers.
The eMarketer eGeography Report (released in April 1999) reports there
are 47 million Internet users residing outside the US and another 48 million
inside the US, for a world total of 95.4 million. These figures are based on
counting only "active" net users, defined as those that get online at least
once a week and for a period of at least one to two hours per week.
According to the Dunlap survey, about 100 million of the Internet's 180
million subscribers still speak English, but Spanish and Japanese usage have
each risen to 14.2 million users. We believe that as more people access the
Internet in languages other than English, businesses marketing on the Web need
to expand to accommodate such users. Bookdigital believes that it is
important for web sites which need international exposure to known how many
people are in each language group, since a company can analyze its current
sales activity there and decide where to invest in promoting their web site.
Today, business professionals are twice as likely to use the Internet to
find sources for products and technologies as they were a year ago. This
rising importance of the Internet as a business-to-business buying tool was
highlighted by a survey released from Cahners Business Information, a trade
magazine publisher. According to the survey:
12% of business professionals who buy or set specifications for
purchase in their companies look first to web sites for
information. This compares with just 5% a year ago.
15% now turn to broad-based Internet search engines, versus 8% a
year ago.
Worldwide, eStats projects that the number of Internet users will nearly
quadruple over the next five years, from 36.0 million in 1997 to 142.0 million
by the year 2002. This represents an average annual growth rate of 79%.
Competition
There are competing sites on the Internet that offer copyrighted books
for sale and other
sites that offer public domain books for free. The sites offering copyrighted
sites are well known such as Amazon.com and Barnesandnoble.com. We will offer
some copyrighted books, but our main focus is in gathering all available
quality reference material under one site. Most of this reference material is
not copyrighted.
Most web sites offering reference materials are located on web sites
organized by academic institutions. The sites that currently offer public
domain books offer them in an ASCII format and are non-profit organizations,
typically subsets of universities. Generally, these sites are difficult to
locate, and difficult to access. Sites offering on-line law reference material
are WestLaw and Lexis/Nexis. While we expect to compete with Westlaw and
Lexis, we are aware that these services are much more well established, better
known and better funded than we are. We could also face competition in the
future from web directories, search engine, content sites, commercial online
service providers, sites maintained by Internet services providers,
traditional media companies and other entities that attempt to or establish
web sites similar to Bookdigital. There can be no assurance that our
competitors and potential competitors will not develop sites that are equal or
superior to us or that achieve greater market acceptance.
Nearly all of our existing and potential competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources that
Bookdigital. Such competitors are able to undertake more extensive marketing
campaigns for their brands and services, and make more attractive offers to
potential employees, and potential advertisers. There can be no assurance
that we will be able to compete successfully against our current or future
competitors or that competition will not have a material adverse effect on our
business, results of operations and financial condition.
Marketing Promotion and Advertising
It is our intention that the advertising, promotion and public relations
for Bookdigital and
its products will be overseen by designated public relations and advertising
firms. Marketing of the Web site name will be aggressively pursued. We will
use all mediums available for advertising. We realize that name recognition
is extremely important to the future success of our company.
The development of advertising revenue from the placement of banner ads
on the Bookdigital Web site will continue to be aggressively pursued by our
sales force. We intend to hire experienced personnel to market Bookdigital's
web site to advertisers and advertising agencies.
Bookdigital intends to utilize strategic alliances where feasible in
order to maximize revenue. For example, Bookdigital has entered into over
eighty such "alliances" with manufacturers/advertisers, such as GoTo.com,
Borders, Dell Computer, Amazon.com, Sharper Image, Staples and the Lending
Tree, so that a link to the Vendor's site appears as a banner on our site. We
receive revenue per click through or revenue per sale consummated.
Bookdigital will seek to develop and market as many additional books and
other reference material as possible, and in as many languages as possible.
Languages planned are Spanish, French, Italian, German, Chinese and Japanese.
This will serve to add many potential customers for the near future.
INDUSTRY BACKGROUND
E-COMMERCE. The new arena of e-commerce provides retailers with the
opportunity to serve a rapidly growing market because consumers are
increasingly accepting the Internet as an alternative shopping channel. The
Internet is becoming an increasingly accepted method of purchasing goods among
consumers. According to Jupiter Communications, as of the end of 1998, almost
10 million U.S. households have made at least one on-line purchase and by the
end of 2002 this population is expected to grow to approximately 36.5 million,
representing nearly 60 percent of U.S. online households. We believe that
these figures will continue to grow as Internet use becomes easier and more
pleasurable through higher-speed access and less expensive and alternative
Internet access devices. The growth rate of Bookdigital customer base and
revenues may be different from the growth rate of households making online
purchases.
The Internet also provides e-commerce companies with an opportunity to
serve a global market. Jupiter Communications' April 1999 estimates project
that the number of Internet connected households worldwide will grow from
approximately 60 million at the end of 1998 to approximately 124 million by
the end of 2002. IDC estimates that the number of Web users worldwide will
exceed 130 million by the end of 1999 and will grow to over 315 million users
by the end of 202. The growth rate of Bookdigital's international customer
base and revenues from international sales may be different from the growth
rate of Internet-connected households worldwide or the growth rate of
worldwide Web users.
PRODUCTS THAT ARE WELL SUITED FOR E-COMMERCE. The reference book
business is particulary well suited for e-commerce because an online site has
virtually unlimited shelf space and can offer consumers anywhere the
convenience of browsing through vast product information databases. The use
of sophisticated search engines and personalized services enables users to
locate information with convenience and speed and to get advance notice about
materials in their areas of personal interest. Editorial content, such as
synopses, excerpts, reviews and editorial recommendations, make for a more-
educated and entertaining purchasing decision. The Company believes that the
presence of online stores on consumers' desktops will, in and of itself,
stimulate demand and expand the marketplace.
BUSINESS STRATEGY
Bookdigital seeks to become the leading online source for consumers who
need to obtain certain information and/or data. To achieve this objective,
Bookdigital has focused its efforts on providing the highest possible levels
of value and service, which it believes are reflected in the completeness of
its product selection, the ease-of-use of its Web site, and the speed of
delivery it can offer its customers. While the principal focus of Bookdigital
will be reference information, it will continue to seek opportunities that
expand its product offering to complementary information, entertainment and
intellectual property-based products, and to present them to customers with
the highest contextual relevance. It is our goal to be recognized as the most
innovative and customer-focused of e-commerce merchants, making online
research a simple, personal and gratifying experience that results in the
highest of customer loyalty.
Central to achieving these objectives, Bookdigital's operating strategy
is focused on rapidly extending its brand and increasing its customer and
revenue base by:
CONTINUALLY ENHANCING THE USER EXPERIENCE. Bookdigital is committed to
making every aspect of browsing, shopping and researching on its Web site an
easy and pleasurable experience. It makes continual efforts to improve the
design, layout and navigation of all elements of its Web site, as well as to
ensure that the site's performance metrics are competitive, especially with
regard to page download times and the speed of all research function.
Bookdigital also strives to make the ordering and processing easy, intuitive,
fast and secure.
OFFERING A LARGE PRODUCT SELECTION AND FAST DELIVERY. Bookdigital
intends to offer the largest selection of on-line reference materials and
organized links. This includes books on a variety of topics from astronomy to
law; engineering to medicine. We believe Bookdigital's online databases will
act as a highly searchable catalog for a wide spectrum of materials.
EXPANDING ITS PRODUCTS OFFERING. Bookdigital believes that our entire
range of technologies, inclusive of its database and search engine, quick
information access and related EDI interfaces with vendors will enable it to
position itself as a premier delivery mechanism for reference material, such
as manuals and pamphlets.
BUILDING BRAND AWARENESS AND DRIVING CUSTOMER ACQUISITION THROUGH
ADVERTISING AND PROMOTION. Bookdigital will seek to invest in building our
online brand and in communicating the benefits and convenience of using our
Web site. We intend to deploy a variety of media, including online, radio,
television, print and outdoor advertising to rapidly grow our customer base.
In all our advertising and promotion initiatives, Bookdigital will seek to
continuously drive down the costs of acquiring new customers, as well as to
get visitors to return to our site more frequently and to increase the use or
our offered services and advertisers.
STRENGTHENING AND EXPANDING STRATEGIC ALLIANCES. Bookdigital will
continue to seek out additional entities to operate as third-party web sites
with whom it hopes to develop ability to generate alliances with merchandising
support, strengthening our ability to generate sales, to promote Bookdigital's
brand.
MARKETING AND PROMOTION. Since inception, Bookdigital has pursued
strategic alliances with premier online companies and high traffic web sites
in order to drive traffic to its web site. We have entered into agreements
with complimentary companies such as computer manufactures, hard drive,
monitor and other manufactures. Generally, strategic alliance deals are
arrangements which provide for links to other web sites to be placed on
Bookdigital in order to direct traffic to those other sites, in exchange for
which Bookdigital receives a commission or percent of ensuing sales.
Bookdigital will also use the unique characteristic of the Web to cost-
effectively market our products and services and to develop a sizable
membership base. Key elements to our approach are:
Development of a detailed subscriber database.
Customer convenience
Expand the Bookdigital library
Develop selected subject areas, such as law and medicine, so
Bookdigital can become a comprehensive specialized research source
Continue to refine electronic book technology
Segment our site uses so we can offer highly targeted audiences to
advertisers
Sign agreements with publishers that allow for the publishing of
their latest books in digital format on our web site
Incorporate books and reference materials in various languages
Our objective is to develop a sizable membership base and to create a
one-stop digital reference source. To achieve this goal, we will:
Focus on membership growth
Build strong brand recognition
Promote repeat usage and member loyalty
Offer new products and services
Maintain and improve technological focus and expertise
EMPLOYEES
As of June 30, 1999, Bookdigital had three, full time employees and six
part time employees/consultants. Our future success will depend, in part, on
our ability to continue to attract, retain and motivate highly qualified
technical and management personnel, for whom competition is intense. From
time to time, we also employ independent contractors to support our research
and development, marketing, sales and support and administrative organization.
Our employees are not covered by any collective bargaining agreement, and we
have never experienced a work stoppage. We believe that our relations with
our employees are good.
FACILITIES
Our headquarters are currently located in New York City, consisting of
approximately 1,890 square feet of office space which is under a lease that
expires in 2007.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of Bookdigital and
their respective ages as of June 30, 1999, are as follows:
NAME AGE POSITION
Don L. Rose 42 CEO, Director
Zahra S. Yamani 29 President, Director
Susan L. Schuler 53 Secretary, Director
David Blechman 48 Director
Irwin Bosh Stack 71 Director
DON L. ROSE has been Chief Executive Officer and a director of Bookdigital
since June 1999. From June 1994 to June 1999, Mr. Rose served as founder and
President of American Equity Financing, Inc., a full service venture capital
firm that worked with companies to assist them in all areas of growth.
American Equity Financing owns 1,800,000 shares of restricted common stock in
Bookdigital. Mr. Rose served as a consultant to First Madison Securities in
their investment banking area from February of 1999 to June of 1999. Mr. Rose
has extensive experience in the areas of acquisitions, start-up of public and
private companies, growth financing, investor relations, engineering, project
control and general business consulting. consulting firm of which he is
principal. His previous roles prior to founding American Equity Financing
included licensed stock broker, investment banker, founder and President of a
very successful business consulting firm that conducted management efficiency
audits, coordinated computing and engineering projects, setup enterprise wide
databases and other functions as needed by the clients. Mr. Rose is an eight
year veteran of the U.S. Navy and holds a B.S. in Computer Science from Union
College of New York.
ZAHRA S. YAMANI has been President and a director of Bookdigital since its
inception. Ms. Yamani has experience in research and development in the areas
of physics and computation technology. She is currently completing her Ph.D.
in research on high temperature super conductivity from the University of
Toronto. Ms. Yamani has been a research assistant in the physics department of
the University of Toronto.
SUSAN L. SCHULER has been Secretary and a director of the Company since
Bookdigital's inception in March 1999. Since June 1983, Ms. Schuler has owned
Kennedy & Kennedy, a consulting firm. Ms. Schuler has served as controller
and chief financial officer of Nesbit Systems, Inc., a software developer
since 1986. She has been controller of Singer Frumento, L.L.P., a law firm,
since September 1996. She is the owner and President of Blue Sky Services
Corp. A consulting company specializing in security regulation. She is also
the President of Auric Investment Group, Ltd., a precious metals dealer
specializing in bullion gold coins. Ms Schuler is a member of the NSCP,
National Society of Compliance Professionals. She received a B.S. from
Portland State College in 1968.
DAVID BLECHMAN has been a director since the company's inception. From 1992
to 1997, Mr. Blechman served as vice president of ManageMed, Inc., a medical
office management services company. Since March 1999, he has served as vice
president and chief technical officer of PriMed Technologies. He has
extensive experience in management consulting as well as the development of
various computer software models for businesses as diverse as wholesalers,
doctors, laboratories, casinos, and option traders. He also has designed and
implemented comprehensive document management systems for the medical field.
Mr. Blechman was involved in the introduction of voice to text technology for
computers and holds a MS in Management Sciences from Lehigh University in
Pennsylvania.
IRWIN BOSH STACK has been a director of Bookdigital since July 1999. From
1993 to 1996, he served as chairman of Oaktree Medical Systems, a publicly
traded company, which owend and operated medical clinics. Since 19996, he has
been president of Stack Assoicates, Inc., independent marketign consultants.
EXECUTIVE COMPENSATION
Directors' Compensation
Directors will be reimbursed for the expenses they actually incur in
attending board meetings. Directors will not be paid a fee for their service
or attendance at board meetings. To date, directors have received no
compensation.
Executive Officers' Compensation
Bookdigital was incorporated in March 1999. Don L. Rose, our Chief
Executive Officer, shall receive an annual salary of $85,000, Zahra Yamani,
our president, shall receive a salary of $75,000 per year, and Susan L.
Schueler, our secretary, shall receive a salary of $40,000 per year.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to Bookdigital
with respect to beneficial ownership of Bookdigital's common stock as of June
30, 1999, and as adjusted for the sale of the securities offered by this
prospectus, the number and percentage of outstanding shares of common stock
beneficially owned by each person who beneficially owns:
more than 5% of the outstanding shares of our common stock;
each of our officers and directors; and
all of our officers and directors as a group.
Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common stock owned by them.
<TABLE>
<S> <C> <C> <C>
<C> Number of
Name and Address Of Shares %Beneficially Owned %Beneficially
Owned
Beneficial Owner Beneficially Owned Before Offering(4)
After Offering(4)
Zahra S.
Yamani(1)
321 Bloor Street
West
Toronto, Ontario
M55155, Canada 10,000 15.7% 12.7%
Knightsbridge(1)
Capital, Inc.
321 Bloor Street
West
Toronto, Ontario
M55155, Canada 2,028,000 39.2% 31.8%
American Equity
Financing,
Inc.(2)
1078 Route 112
Suite 183
Port Jefferson,
NY 1,800,000 34.8% 28.2%
Irwin Bosh Stack
(3)
16504 Sonehaven
Rd.
Miami Lakes, FL 25,000 4.8% 3.9%
David Blechman
350 NW 12th Avenue
Deerfield Beach,
FL 33442 25,000 4.8% 3.9%
Susan L. Schuler
8 Elmwynd Drive
Allentown, NJ
08501 20,000 3.9% 3.10%
All Officers and
Directors as a
Group
(5 persons) 4,658,000 90.0% 73.1%
</TABLE>
(1) Zahra S. Yamani, President of Bookdigital, is the sole officer and
director of Knightsbridge Capital, Inc., as well as its controlling
shareholder.
(2) Don L. Rose, our Chief Executive Officer, is a controlling shareholder of
American Equity Financing, Inc.
(3) Irwin Bosh Stack, a director of Bookdigital, is the sole officer, director
and shareholder of Prolearner, Inc., a selling security holder in this
offering.
(4) Excludes all shares issuable upon exercise of 370,800 outstanding
warrants.
SELLING SECURITY HOLDERS
All of the purchaser of Units in Bookdigital's private placement
offering which ended May 31, 1999, are registering their Units, as well
as the shares of common stock underlying the Warrants. Additionally,
several other security holders are registering their securities.
<TABLE>
<S>
<C> <C> <C>
Name of selling security
holder Number of Units owned Number of Units being
Registered
Herman & Susanna
Lebovitch
425 Mayfair Drive South
Brooklyn, New York 11234 1,000 1,000
Robert Russo
6775 Cloverdale Lane
Bayside, New York 11364 2,000 2,000
Antonia Castoro
1702 Manhattan Avenue
Union City, NJ 07087 1,000 1,000
Alex Yelensky
300 East 59 Street, Apt.
5201
New York, NY 10022 2,000 2,000
Goldie Engel
1366 45th Street
Brooklyn, NY 11219-2101 4,000 4,000
Alon & Mordechai Ben-Ami
136-59 Jewel Ave.
Flushing, NY 11367 1,000 1,000
Wendy Greenberg
104 Harris Drive
Ocean Side, NY 11572-
5713 1,000 1,000
Emily &Kasil Karzhevsky
2185 Lemoine Ave.
Apt. 2-H
Fort Lee, NJ 07024 3,000 3,000
Adalbert &Carolina Wais
1617 East 2nd Street
Brooklyn, New York 11230 1,000 1,000
Michael Colello
164 Berry Hill Road
Warren, NJ 07059 5,000 5,000
Richard A. Sulzman
297 Main Street
Millburn, NJ 07041 1,000 1,000
Abraham Stern
1244 47th Street
Brooklyn, NY 11230 2,000 2,000
Moshe Sherman
144-21 72nd Road
Flushing, NY 11367 1,000 1,000
Kalman Strobel
1801 Avenue K
Brooklyn, NY 11230 5,000 5,000
Eddy Zaken
125 West 45th Street
New York, NY 10036 1,000 1,000
Alan Bentley Johnson
11 Sloane Square House,
Holbein Place
London, England SW1 8NS 1,000 1,000
Lawrence G. Frisa
Crest Drive #2022
Las Vegas, NV 89129 2,000 2,000
Ruth Cohen
2739 Strickland Avenue
Brooklyn, NY 11234 2,000 2,000
Carrie Lynn Dayon
2121 East 64th Street
Brooklyn, NY 11234 2,000 2,000
Barry & Mordechai
Timberg
2722 Brown Street
Brooklyn, NY 11235 5,000 5,000
Felix N. & Eildonna E.
Daniel
2716 Marion Avenue, #2-G
Bronx, NY 10458 1,000 1,000
Steve D. Solomon
13005 Wimberly Square
#157
San Diego, CA 92128-6016 1,000 1,000
Orly & Bijan Farahan
20229 Ocean Key Drive
Boca Raton, FL 33498 1,000 1,000
Neal V. Muccio
2716 Karen Street
Bellmore, NY 11710 1,000 1,000
Moysey Shtaynberg
2660 East 28th Street
Brooklyn, NY 11235 3,000 3,000
Maria Vertsberger
2221 East 59th Place
Brooklyn, NY 11234 1,000 1,000
Anton Fischman
11 Woodland Place
Great neck, NY 11021 5,000 5,000
Emil A. Weiss
2710 Avenue S.
Brooklyn, NY 11229 1,000 1,000
Eric A. Kahn & Paul
Ginns
112 West 86th Street,
Apt. 7
New York, NY 10024 1,000 1,000
Daniel Herman
66-25 103rd Street, Apt.
3R
Forest Hill, NY 11375 3,000 3,000
Gabi Aharoni
15 West Terrace Road
Great neck, NY 11021 5,000 5,000
Amir Cohen
6920 Avenue L
Brooklyn, NY 11234 5,000 5,000
Carmine Bruno
47 Harwood Road
Jamesburg, NJ 08831 2,000 2,000
Jack Friedman
129 Audley Street
Kew Gardens, NY 11418 3,000 3,000
Patricia Quinn
32-50 Jordan Street
Flushing, NY 11358 1,000 1,000
Sandra M. Perez
67 Manhattan Avenue, #
13Q
Brooklyn, NY 11206 1,000 1,000
Janis L. Fidotta
25 Greentree Court
Northport, NY 11768 5,000 5,000
Vincent Garcia &
Elizabeth E. Gallagher
8 Strong Place
Brooklyn, NY 11231 500 500
Hindy Amsel Sherman
1424 East 17th Street
Brooklyn, NY 11367 2,500 2,500
Cheryl Weiss
137-39 70th Street
Flushing, New York 11358 1,000 1,000
Silkes Family Ltd.
Partnership
Custodian for Hyman
Silkes
2724 Tidewater Court
Las Vegas, NV 89117-2447 1,000 1,000
Emilio Villegas
43 Quaker Ridge Court
Manhasset, NY 11030 2,000 2,000
Marie Cirillo
2 Canter Drive
Basking Ridge, NJ 11030 1,000 1,000
Jean S. Davies
7039 Pointe Inverness
Fort Wayne, In 46804 1,000 1,000
Nina Ghavami
718 High Woods Drive
Franklin Lakes, NJ 07417 1,000 1,000
Ike Abady
1722 Kings Highway
Brooklyn, NY 11229 3,000 3,000
Tibor Gershkovich
61 Barlou Drive
Brooklyn, NY 11234 1,000 1,000
Hedi & David Hertz
2024 Ocean Avenue
Brooklyn, NY 11230 2,000 2,000
Behrooz & Jaklin
Khorsandi
156- 15 79th Avenue , #
2H
Flushing, NY 11367 1,000 1,000
Jamshid Shabtayi & Janet
Mehraban
152-18 Union Tpke., Apt.
8A
Flushing, Ny 11367 1,000 1,000
John Reeves
20 Barrister Road
Levittown, NY 11756 1,000 1,000
Glenn C. Ross
2875 S. Nellis Blvd., #
6
Las Vegas, NV 89121 500 500
Luisa Sanchez
860 Grand Concourse
Avenue, Apt., 4E
Bronx, NY 10451 1,000 1,000
Rita P. Shea
P.O. Box 820
East Setauket, NY 11733 1,000 1,000
Charles C. Papp
22 Tremont Street,
Bronx, New York 1,000 1,000
Marcus & Michael Weiss
2302 Avenue S.
Brooklyn, NY 11229 1,000 1,000
Michael & Dora Weiss
2302 Avenue S
Brooklyn, NY 11229 3,000 3,000
Marie Frisa
3416 Kilflyn Street, #
101
Las Vegas, NV 89129 2,000 2,000
Hector & Selim Florimon
35 Woodcrest Drive
Muttontown, NY 11791 4,000 4,000
David Dorf
9528 Seaview Court
Brooklyn, NY 11236 1,000 1,000
Wing H. Ng
1917 Kings Highway
Brooklyn, NY 11229 1,000 1,000
Juan Estevez
43 Hayhurst Drive
New Rochelle, NY 10804 1,200 1,200
Rose Lemkin
35-16 75 Street, Apt,
608
Jackson Heights, NY
11372 2,000 2,000
Svetlana Galperin
35th 75 Street, Apt. 302
Jackson Hts., NY 11235 2,000 2,000
Alexander Vais
2660 East 28th Street
Brooklyn, NY 11235 3,000 3,000
H.P. Industries, Inc.
10 east 11th Street
Lakewood, NJ 08701 2,000 2,000
Gabrielle & Mayer
Guttman
1803 East 22nd Street
Brooklyn, NY 11229 1,000 1,000
Sam Schwartz
186 Barlou Drive
Brooklyn, NY 11234 5,000 5,000
Nicolay Yahuhouid
2711 Whiteman Drive
Brooklyn, NY 11234 5,000 5,000
Hector Valencia
45-59 168th Street
Flushing, NY 5,000 5,000
Scott Burdo
33 Pamela Lane
Staten Island, NY 10304 5,000 5,000
Audrey Arnsdorf
22 East 31st Street,
Apt. # 1D
New York, NY 10016 1,500 1,500
Irwin Friedman
130 Clymer, Apt. #19C
Brooklyn, NY 11211 1,000 1,000
Josephine Canzoneri
2241 Plumb 1st Street
Apt. #2K
Brooklyn, NY 11229 1,000 1,000
Angelina Salli
1916 Stuart Street
Brooklyn, NY 11209 1,000 1,000
Mayer Guttman
1803 East 22nd Street
Brooklyn, NY 11209 5,000 5,000
Peggy & Michael Weiss
2302 Avenue S
Brooklyn, NY 11229 1,000 1,000
Eta Glickman
2166 Haring Street
Brooklyn, NY 11229 1,000 1,000
Ludwig Eisner
Custodian for Sheila
Eisner
1413 East 17th Street
Brooklyn, Ny 11230 1,000 1,000
Ludwig Eisner
Custodian for Cheryl J.
Eisner
1431 East 17th Street
Brooklyn, NY 11230 1,000 1,000
Ludwig Eisner
Custodia for Jacob D.
Eisner
1431 East 17th Street
Brooklyn, NY 11230 1,000 1,000
Ludwig Eisner
Custodian for Rebecca T.
Eisner
1431 East 17th Street
Brooklyn, NY 11230 1,000 1,000
Esther M. Eisner
1431 East 17th Street
Brooklyn, NY 11230 1,000 1,000
Gary L. Wasserman
781 Hyslip Ave.
Westfield, NJ 07090 1,000 1,000
Joseph Sterrantino
4731 N.W. 65th Avenue
Lauderhill, FL 33319 1,000 1,000
Robert E. Keilman
22 Takolusa Dr.
Holmdel, NJ 07733 1,000 1,000
Eugene Gulka
9 Buttermilk Ridge RD
Atlantic Highlands, NJ
07716 1,000 1,000
Richard M. Timothy
2 Beush Hill Road
Kinnelon, NJ 1,000 1,000
Samuel Sherman 1,000 1,000
137-40 70th Road
Flushing, NY
</TABLE>
<TABLE>
<S>
<C> <C> <C>
Name of Selling Security
Holder
Number of Warrants owned
Number of Warrants being
Registered
Alfred Schiffrin
6760 South Grande Drive
Boca Raton, FL 25,000 25,000
Joanne Iucci
3714 Avenue T
Brooklyn, NY 50,000 50,000
Abraham Stern
1244 47th Street
Brooklyn, NY 600 600
Sandy Horowitz
1660 80th Street
Brooklyn, NY(1) 50,000 50,000
Amir Cohen
6920 Avenue L
Brooklyn, NY 50,000 50,000
Jackie Irni
157 Barlow Drive South
Brooklyn, NY 20,000 20,000
(1) Sandy Horowitz is a broker at First Madison Securities, Inc., the
Underwriter in this offering.
</TABLE>
<TABLE>
<S>
<C> <C> <C>
Name of Selling Security
Holder Number of Shares of
Common Stock Owned Number of Shares of
Common Stock being
registered
The Parkway Group Inc.
6674 Serena Lane
Boca Raton, FL. 25,000 25,000
Alfred Schriffin
6760 South Grande Drive
Boca Raton, FL 5,000 5,000
Venture Investing
Associates
c/o Bob Reid
7000 S. Federal Hwy #300
Stewart, FL 35,000 35,000
Mayer Guttman 15,000 15,000
1803 E. 22nd St.
Brooklyn, NY
Pegasus Asset Mgmt. Ltd. 115,000 115,000
5301 Francisco Ave.
Agura Hills, CA
Freydoon Kashani 2,000 2,000
5 Bayberry Drive
Princeton, NY(1)
Prolearner.com, Inc. 25,000 25,000
11669 Timbers Way
Boca Raton, FL(2)
</TABLE>
(1) Mr. Kashani is a broker at First Madison Securities, Inc., the underwriter
for this offering.
(2) The sole officer, director and shareholder of Prolearner.com, Inc. is
Irwin Bosh Stack, a director of Bookdigital.
DESCRIPTION OF SECURITIES
As of the date of this prospectus, our authorized capital stock consists
of 20,000,000 shares of common stock and 0 shares of preferred stock.
Units
Each unit consists of one share of common stock and one warrant. The
common stock and warrants, all of which are being registered in this offering,
will become immediately separately transferable following this offering.
Common Stock
As of May 31, 1999, there were 5,175,200 shares of common stock
outstanding held of record by approximately 100 shareholders. Excluding the
exercise of outstanding warrants, there will be 6,375,200 shares of common
stock outstanding after giving effect to the sale of the 1,200,000 we are
offering.
Holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders.
Subject to preferences that may be applicable to the holders of
outstanding shares of preferred stock, the holders of common stock are
entitled to receive such lawful dividends ad the board of directors may
declare from time to time. In the event we liquidate, dissolve or wind up,
and subject to the rights of the holders of outstanding shares of preferred
stock, the holders of shares of common stock will be entitled to receive pro
rata all of our remaining assets available for distribution to our
shareholders. There are no redemption or sinking fund provisions applicable
to the common stock. All outstanding shares of common stock are fully paid and
nonassessable, and shares of common stock to be issued pursuant to this
offering will be, upon issuance, fully paid and nonassessable.
Warrants
As of May 31, 1999, there were 370,800 warrants issued and outstanding.
Each warrant entitles the holder to purchase one share of common stock at an
exercise price of (120%) of the initial public offering price of the common
stock. The shares of common stock underlying the warrants, when issued upon
exercise of a warrant, will be fully paid and non-assessable. The warrants are
exercisable for a two year period commencing March 30, 1999, after which they
will expire. The warrants are subject to redemption by Bookdigital at a price
of $.10 per warrant at any time on twenty days prior written notice, provided
the closing bid price of the common stock is at least 120% of the warrant
exercise price ($ ) for twenty consecutive trading days ending three
days prior to the date that notice of redemption was given to warrant holders.
A warrant may be exercised upon surrender of the warrant certificate on
or before the expiration or redemption date of the warrant at the offices of
the warrant agent, with the form of "Election to Purchase" on the reverse side
of the warrant certificate completed and executed as indicated, accompanied by
payment of the exercise price (by certified or bank check payable to the order
of Bookdigital.com, Inc.) for the number of shares with respect to which the
warrant is being exercised. We will not be required to honor the exercise of
the warrants if, in the opinion of our board of directors with the advice of
counsel, the sale of securities upon exercise would be unlawful.
The foregoing discussion of material terms and provision of the warrants
is qualified in its entirety be reference to the detailed provisions of the
warrant agreement, the form of which has been filed as an exhibit to the
registration statement of which this prospectus is a part.
For the life of the warrants, the holders have the opportunity to profit
from a rise in the market price of the common stock without assuming the risk
of ownership of the share of common stock underlying the warrants. The
warrant holders may be expected to exercise their warrants at a time when we
would, in all likelihood, be able to obtain any needed capital by an offering
of common stock on terms more favorable than those provided for by the
warrants. Furthermore, the terms on which we could obtain additional capital
during the life of the warrants may be adversely affected.
Transfer Agent and Warrant Agent
Continental Stock Transfer, New York, New York, will serve as the
Transfer Agent for the common stock and Warrant Agent for the warrants.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no market for Bookdigital's
securities. Future sales of
substantial amounts of common stock or warrants in the public market could
adversely affect market prices prevailing from time to time.
Upon completion of this offering, Bookdigital will have outstanding an
aggregate of 6,375,200 shares of common stock, assuming no exercise of any
warrants to purchase common stock. 1,647,200 of these shares will be freely
tradable without restriction or further registration under the Securities Act
(except for any shares purchased by "affiliates," as that term defined in Rule
144 under the Securities Act). The remaining 4,728,000 shares are shares of
Restricted Stock, as that term is defined in Rule 144 promulgated under the
Securities Act. Restricted Stock may be sold in public market only if
registered or if it qualifies for an exemption from registration is available.
Pursuant to the provisions of Rule 144 (including Rule 144(k), the
shares of restricted stock would be available for sale in the public market as
follows: 4,728,000 Restricted Shares would be eligible for sale under Rules
144 upon expiration of the one year holding period applicable to restricted
Stock, which expires on various dates between March 1999 and May 1999.
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least one year
(including the holding period of any prior owner except an Affiliate) would be
entitled to sell within any three-month period a number of shares that does
not exceed the greater of: (i) one percent of the number of share of common
stock then outstanding (which will equal approximately 63,752 shares
immediately after this offering); or (ii) the average weekly trading volume of
the common stock during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about Bookdigital. Under Rule
144(k), a person who is not deemed to have been an Affiliate of Bookdigital at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner except for an Affiliate), is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144; therefore, unless otherwise
restricted, "144(k) shares" may be sold immediately upon the completion of
this offering.
UNDERWRITING
The underwriters named below (the"Underwriters"), for whom First Madison
Securities, Inc. is acting as Representative, have severally agreed pursuant
to the terms and conditions of the Underwriting Agreement between Bookdigital
and the several Underwriters (the "Underwriting Agreement"), to purchase from
Bookdigital and Bookdigital has agreed to sell to the Underwriters the number
of shares of common stock set forth in the table below at the price set forth
on the cover page of this Prospectus.
Number of
Underwriter Shares
First Madison Securities,
Inc.................................................... 1,200,000
Total..................................................... 1,200,000
===========
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase such shares of common stock are subject to certain
conditions. The Underwriters are not committed to purchase of the 1,200,000
shares of common stock offered by this Prospectus; they are selling the shares
on a best effort basis.
The Representative has advised Bookdigital that the Underwriters propose
to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to selected
dealers at such price less a concession within the discretion of the
Representative, and that the Underwriters and such dealers may reallow a
concession to other dealers, including the Underwriters, within the discretion
of the Representative. After the initial public offering of the shares of
common stock, the public offering price, the concessions to selected dealers
and the reallowance to other dealers may be changed by the Representative.
The Representative may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
Units in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock and/or Warrants, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those securities as part of this offering.
The Underwriting Agreement provides for indemnification between
Bookdigital and the Underwriters against certain liabilities, including
liabilities under the Securities Act and for contribution by Bookdigital and
the Underwriters to payments that may be required to be made in respect
thereof. Insofar as indemnification for liabilities under the Securities Act
may be permitted to Bookdigital directors, officers, and controlling persons
of Bookdigital pursuant to the agreement between Bookdigital and the
Underwriters, or otherwise, Bookdigital 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.
Bookdigital has agreed to pay the Representative a nonaccountable
expense allowance equal to three percent of the gross proceeds from the sale
of common stock offered hereby. In the event the offering is not consummated,
any nonaccountable portion of the advanced payment will be promptly returned
to Bookdigital.
Bookdigital has agreed to issue to the Representative the
Representative's Warrants, which entitle the holders to purchase up to an
aggregate of 120,000 shares of common stock (one share for every ten shares
sold by the Representative) for $.001 per warrant. These warrants will have
an exercise price per share equal to 120 % of the initial offering price of
the Units. The Representative's Warrants are not transferable for one year
from the date of issuance, except to individuals who are either a partner or
an officer of an Underwriter, by will or by the laws of descent and
distribution. The Representative's Warrants are not redeemable by
Bookdigital. Bookdigital has agreed to maintain an effective registration
statement with respect to the issuance of the securities underlying the
Representative's Warrants, if necessary, to allow their public resale without
restriction, at all times during the period in which the Representative's
Warrants are exercisable, commencing one year after the date of this
Prospectus. Such securities are being registered on the Registration Statement
of which this Prospectus is a part].
Prior to this offering, there has been no public market for
Bookdigital's securities. Accordingly, the initial public offering price of
the common stock has been determined in negotiations between Bookdigital and
the representative. Among the factors considered in determining the initial
public offering price of the common stock were the history and the prospects
of Bookdigital and the industry in which it operates, the status and
development prospects for Bookdigital's proposed products and services, the
experience and qualifications of Bookdigital's executive officers and the
general condition of the securities markets at the time of the offering.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Bookdigital by its
counsel, Schonfeld & Weinstein, L.L.P., New York, New York . Certain matter
in connection with the offering will be passed upon for the underwriters by
Friedman, Krauss & Zlotolow, New York, New York.
EXPERTS
The balance sheet as of May 31, 1999, and the statements of operations,
stockholders' deficit, and cash flows for each of the two months then ended,
have been audited by Simon Krowitz Bolin & Associates, independent certified
public accountants, as set forth in their report thereon appearing elsewhere
herein and in registration statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
CERTAIN TRANSACTIONS
On March 25, 1999, Bookdigital issued a total of 4,708,040 shares to 7
people for par value. Zahar Yamani, President of Bookdigital, was issued
810,000 of those shares. Knightsbridge Capital, Inc., a company of which Ms.
Yamani is a principal, was issued 2,028,000 of those shares. Additionally,
1,800,000 of the 4,708,040 shares were issued to American Equity Financing,
Inc., a company of which Don L. Rose, Chief Executive Officer of Bookdigital,
is a principal. Susan L. Schuler, Secretary of Bookdigital, purchased 20,000
shares, and David Blechman, a director, purchased 25,000 shares.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form SB-2
under the Securities Act of 1933, as amended with respect to the Common stock
offered hereby as well as common stocks and warrants held by selling
shareholders. This prospectus omits certain information contained in the
registration statement and the exhibits thereto, as permitted y the rules and
regulations of the Commission. For further information with respect to the
Company and the securities, reference is hereby made to the Registration
Statement and such exhibits filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street , N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 75 Park Place, 14th Floor,
New York, NY 10007. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
upon payment of the prescribed fees. The SEC maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC, including the
Registration Statement. The address of the SEC"s World Wide Web site is
http://www.sec.gov.
Statements contained in this prospectus as to the contents of any
contract or other documents referred to herein are not necessarily complete
and. In each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement, each such
statement being qualified in all respect by such reference.
On May 31, 1999, Prolearner, Inc., a company of which Irwin Bosh Stack, a
director, is a principal, was issued 25,000 shares for consulting services
rendered to Bookdigital.
<PAGE>
BOOKDIGITAL.COM, INC.
Table of contents
Independent Auditors Report
Financial Statements
Balance Sheet
Statement of Income and Retained Earnings
Statement of Change in Stockholder's Equity
Statement of Cash Flows
Notes to Financial Statements
<PAGE>
Independent Auditor's Report
To the Board of Directors of
Bookdigital.com, Inc.
Princeton, New Jersey
We have audited the accompanying sheet of Bookdigital.com, Inc. as of May 31,
1999 and the related statements of income and retained earning and cash flows
for the period from inception (March 25,1999) to may 31, 1999. Theses
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bookdigital.com, Inc. as of
May 31, 1999 and the results of its operations and its cash flows for the
initial period then ended in conformity with generally accepted accounting
principles.
Simon Krowitz Bolin & Associates
June 23, 1999
<PAGE>
BOOKDIGITAL.COM, INC.
(A development Stage Company)
BALANCE SHEET
May 31, 1999
ASSETS
Current Assets
Cash (Note 1) $ 128,629
Investment Securities 978,478
Total Current Assets 1,107,107
Property and Equipment (note 1)
Computer Equipment 15,800
Other Assets
Organization Costs 152,283
TOTAL ASSETS $1,275,190
LIABILITIES AND STOCKHOLDER'S EQUITY
Liability Payable $ 322,561
Stockholder's Equity
Common Stock-0.001 Par Value; 20,000,000 Shares
Authorized, 5,110,200 Shares Issued and Outstanding 5,175
Paid-in Capital 965,889
Retained Earnings, including Deficit Accumulated During the
Development Stage (18,436)
Total Stockholder's Equity 952,628
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,275,190
See Auditor's Report and Notes to Financial Statements.
<PAGE>
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Period March 25, 1999 (Date of Inception), to May 31, 1999
INCOME
Interest Income $ 816
Realized Gain on Investments 69,462
TOTAL GROSS INCOME 70,278
EXPENSES
Accounting Fee 1,500
Bank Charge 42
Consulting Fees 12,000
Entertainment 2,200
Interest Expenses 360
Internet 130
Legal expenses 8,500
Office expenses 3,147
Postage 885
Professional Fee-Other 8,250
Rent 7,200
Retainer Fee 40,000
Telephone expenses 4,500
TOTAL EXPENSES 88,714
NET DEFICIT (18,436)
RETAINED EARNINGS AT MARCH 25, 1999 (INCEPTION) 0
RETAINED EARNING-MAY 31, 1999 $ (18,436)
NET DEFICIT PER SHARE - BASIC $ (.003)
NET DEFICIT PER SHARE - DILUTED $ (.003)
SHARES USED IN PER SHARES CALCULATION - BASIC 5,175,200
SHARES USED IN PER SHARE CALCULATION - DILUTED 5,175,200
See Auditor's Report and Notes to Financial Statements.
<PAGE>
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGE IN STOCKHOLDER'S EQUITY
For the Period from March 25, 1999 (date of inception)to May 31, 1999
Shares Amount Retained Earnings Total Comprehensive
Income
Balance at
March 25,
1999 0 $ 0 0 $ 0
Issuance of
Common
Stock 5,175,200 5,175 5,175
Paid-in
Capital 965,889 965,889
Net Loss (18,436) (18,436) (18,436)
Balance at
May 31,
1990 5,175,200 $971,064 $(18,436) $952,628 $(18,436)
See Auditor's Report and Notes to Financial Statements.
<PAGE>
BOOKDIGITAL.COM, INC.
( A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from March 25, 1999(date of inception), to May 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Deficit $ (18,436)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Marketable Equity Securities (978,478)
Purchases of Computer Equipment (15,800)
Capital Expenditures - Organization Cost (123,428)
NET CASH USED BY INVESTING ACTIVITIES (1,117,706)
CASH FLOWS FROM BY FINANCING ACTIVITIES
Proceeds from Issuance Common Stock 942,210
Proceeds from Short-term Debt 322,560
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,264,770
NET INCREASE IN CASH 128,628
CASH-MARCH 25, 1999 0
CASH-MAY 31, 1999 $ 128,628
Supplemental Disclosure:
Interest Paid During the Year $ 360
See Auditor's Report and Notes to Financial Statement.
<PAGE>
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Business Activity - Bookdgital.Com, Inc. (The Company) is a
development stage company. The Company was incorporated in the Delaware on
March 25, 1999. The Company provides access to and sells digital versions of
books and other services/merchandise via the Internet in a format that is
familiar, readily accessible, user friendly and convenient. The Company
intends to become THE source for reference and digital books on the Internet.
The Company's product line is digital books sold via the Internet,
www.Bookdigital.com, in a user friendly format. This format presents the
reading material in a familiar, easily utilized setting. Books are currently
available in English. It is expanding into additional languages such is
German, French, Italian, Japanese and Chines.
Cash and Cash Equivalents - Bookdigital.Com, Inc. maintains a bank account and
a petty cash fund, both of which it classifics as cash for purposes of the
statement of cash flows.
Marketable Equity Securities - The companies' marketable securities consist of
equity securities that have a readily determinable fair market value.
Management determines the appropriate classification of its investment at the
time of purchase and re-evaluates such determinations at each balance sheet
date.
Property, Plant and Equipment - Fixed assets are recorded at cost. The cost
are being depreciated on a straight-line basis over a five-year period.
Organization Cost - The Company incurred organization costs of $152,283
setting up Corp. These costs are being amortized on a straight-line basis
over a five-year period.
Common Stock - Common Stock issued by the company as payment for services has
been valued by management at the estimated fair market value of the stock
existing at the time of its issuance.
Basic and Dilutes Net Income (Loss) per Share - Basic net income (loss) per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is also
computed using the weighted average number of common shares outstanding during
the period, including conversion of any warrants to its equivalent common
stock.
<PAGE>
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
May 31, 1999
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES )Continued)
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date f the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
Concentration of Credit risk - The Company maintains a cash balance in a
money market account with Spear, Leeds & Kellogg. Accounts are insured by the
FDIC (Federal Deposit Insurance Corporation) up to $100,000.
Income Taxes - The Company accounts for income taxes in accordance With
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the use of "Liability method" of accounting for income
taxes. Accordingly, deferred tax liabilities and assets and liabilities,
using enacted rates in effects for the year in which the differences are
expected to reverse. Current income taxes are based upon the year's taxable
income for federal and state income tax reporting purposes.
NOTE 2- STOCKHOLDER'S EQUITY
Common Stock- The Company is authorized to issue 20,000,000 common
shares, $0.001 par value per share and 5,175,200 shares of common stock
were issued and outstanding. The holders of common stock have one vote
per share on all matters (including election of directors) without
provision for cumulative voting. Thus, holders of more than 50% of the
shares voting for the election of director can elect all of the
directors, if they choose to do so. The common stock is not redeemable
and has no conversion or preemptive rights. There are no sinking funds
provisions. In the event of liquidation of the company, the holders of
common stock will share in any balance of the company's assets available
for distribution to them after satisfaction of creditors and preferred
stockholders, if any.
<PAGE>
BOOKDIGITAL. COM, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENT
May 31, 1999
NOTE 2 - STOCKHOLDERS' EQUITY ( Continued)
Warrants - Each Class A warrant entitles the holder to purchase one
share of common stock at an exercise price of 120% of the initial public
offering price ( the "Exercise Price") during the two-year period commencing
March 30, 1999 ("Exercise Period"), The Class A warrants are subject to
redemption by the company at a price of $0.10 per warrant, at any time on
twenty-day prior written notice provided the closing bid price of the common
stock is at least 1205 of the exercise price for twenty consecutive trading
days ending three days prior to the date that notice of redemption was give to
warrant holders. The shares and Class A warrant shall be detachable and
separately tradable as determined by the company. These warrants will have a
one-year holding period. They may be exercised any time after this one-year
period, up to the expiration period of two year.
NOTE 3 - LOAN PAYABLE
The Company maintains as overdraft account with Spear, Leeds & Kellogg,
it brokerage house. The loan is due on demand and bears an interest rate of
6.5% to 7.5%. The loan is secured by the company's investment securities.
Interest payable monthly.
NOTE 4 - INCOME TAXES
Since the Company has not yet realized income as of date of this report,
no provision for income taxes has been made. At May 31, 1999 a deferred tax
asset has not been recorded due to the company's lack of operations to provide
income to use the net operation loss carryover of $18,436 which expires in
2002.
NOTE 5 - CONTINGENCIES
The Company is not currently aware of any legal proceedings or claims
that the company believes will have, individually or in the aggregate, a
material adverse effect on the company's financial position or results of
operations.
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees
and agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) 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 he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) 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 he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court 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 circumstance of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections
(a) and (b) of this section. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
section. Such expenses including attorneys' fees incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation
including absorbed in a consolidation of merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
<PAGE>
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.
Article XI of the Company's By-laws provides for the indemnification of the
company's officers, directors, and corporate employees and agents under
certain circumstances as follows:
Article XI provides that the Company will hold harmless and will indemnify all
officers, directors, employees and agents of the Company against all expense,
liability and loss reasonably incurred or suffered by such person in its
connection as such with the Company. The Company shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by
such person (except against the Company) only if such proceeding was
authorized by the Company's Board of Directors.
If a claim under the above paragraph is not paid in full by the Company within
30 days after a written claim has been received by the Company, the claimant
may at anytime thereafter bring suit against the Company to recover the unpaid
amount of the claim. If the claimant is successful, it is entitled to be paid
the expense of prosecuting such claim, as well.
Notwithstanding any limitations in other sections of the By-laws, the Company
will, to the fullest extend permitted by Section 145 of the General
Corporation Law of Delaware, indemnify any and all persons whom it has the
power to indemnify against any and all of the expense, liabilities and loss,
and this indemnification shall not be deemed exclusive of any other rights to
which the indemnities may be entitled under any By-law, agreement, or
otherwise, both as to action in his/her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such persons.
The Company may, at its own expense, maintain insurance to protect itself and
any director, officer, employee or agent of the Company against any such
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
<PAGE>
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee....................................$ 1,000.00
Securities and Exchange Commission
Registration Fee.............................$ 6,776.23
Legal Fees....................................$ 25,000.00
Accounting Fees...............................$ 10,000.00
Printing and Engraving....................... $ 1,500.00
Blue Sky Qualification Fees and Expenses......$ 3,000.00
Miscellaneous.................................$ 2,000.00
Transfer Agent Fee............................$ 1,500.00
TOTAL...................................................$50,776.23
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Between March 30, 1999 and May 25, 1999, Bookdigital conducted a private
placement of our securities. We offered a maximum amount of 181,800 units,
each unit consisting of one share of common stock and one warrant, exercisable
for one share of common stock at a price equal to 120% of the offering price
in Bookdigital's initial public offering. The units were offered at $5.50 per
unit. We sold 175,200 units to approximately 80 people. We are registering
each unit sold in that private placement. (See "Selling Security Holders.")
On May 31, 1999, we issued 195,600 warrants and 272,000 shares of common stock
to various consultants of Bookdigital for work, labor and services performed
and to be performed in the future. Each of these security holders is
registering his/her securities in this offering. (See "Selling Security
Holders.") Each of these offerings was conducted pursuant to the exemption
from registration contained in Section 4(2) of the Securities Act of 1933.
The March 30, 1999 private placement was also conducted pursuant to Rule 504
of Regulation D.
<PAGE>
EXHIBITS
Item 27.
1.0 Underwriting Agreement
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Specimen Certificate of Common Stock.
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
<PAGE>
Item 28.
UNDERTAKINGS
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
Effective Date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) To deposit into the Escrow Account at the closing, certificates in such
denominations and registered in such names as required by the Company to
permit prompt delivery to each purchaser upon release of such securities from
the Escrow Account in accordance with Rule 419 of Regulation C under the
Securities Act. Pursuant to Rule 419, these certificates shall be deposited
into an escrow account, not to be released until a business combination is
consummated.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York, on July 23, 1999.
BOOKDIGITAL.COM, INC.
BY:
Don L. Rose
Don L. Rose, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
Dated July 23, 1999
Don L. Rose
Don L. Rose
Chief Executive Officer, Director
Dated July 23, 1999
Zahra S. Yamani
Zahra S. Yamani
President, Director
Susan L. Schuler Dated July 23, 1999
Susan L. Schuler
Secretary, Director
Irwin Bosh Stack Dated July 23, 1999
Irwin Bosh Stack
Director
<PAGE>
Underwriting Agreement
1,200,000 Common Shares
BOOKDIGITAL.COM INC.
UNDERWRITING AGREEMENT
Between
FIRST MADISON SECURITIES, INC.
AND
BOOKDIGITAL.COM INC.
1. Introductory.
BOOKDIGITAL.COM INC., a Delaware corporation (the "Company"), proposes to
sell 1,200,000 Common Shares to the public through FIRST MADISON SECURITIES,
INC. (the "Underwriter") as exclusive agent of the Company, at a price of $8 -
$10 per Common Share. The Company also proposes to issue and sell at the
public offering to the Underwriter and/or its assigns, warrants to purchase
from the Company one (1) share for every ten (10) Common Shares sold (the
"Underwriter's Warrants") in the offering at a price of $.001 per warrant. The
Underwriter's Warrants will be exercisable at 120% of the initial public
offering price of the Common Shares. The Underwriter's Warrants are
exercisable for a period of five (5) years, commencing one year from the date
of the prospectus. The shares of common stock issuable upon exercise of the
Underwriter's Warrants are called the "Underwriter's Stock". The purpose of
this agreement is to confirm the arrangements with respect to the offering of
the Common Shares and the purchase of the Underwriter's Warrants.
2. Representations and Warranties of the Company.
The Company represents, warrants and agrees with the Underwriter
that:
2.1 The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Delaware,
with full power and authority to own and operate its properties and to conduct
its business, and the Company is lawfully qualified to do business as a
foreign corporation in good standing in all jurisdictions in which the
ownership of its properties or the conduct of its business requires such
qualification. The issued shares of common stock of the Company have been, the
Stock, and the Underwriter's Warrants to be issued by the Company when paid
for and delivered in accordance herewith will be, and the Underwriter's Stock,
when paid for and delivered upon exercise of the Underwriter's Warrants will
be, duly authorized and validly issued, fully paid and non-assessable; and the
holders of Stock, Underwriter's Warrants and Underwriter's Stock (collectively
the "Securities") will not be subject to personal liability by reason of being
such holders. No preemptive rights of stockholders of the Company with
respect to the issue and sale of the Securities pursuant hereto will exist
with respect to the Stock and Underwriter's Stock upon the exercise of the
Underwriter's Warrants. The Underwriter's Stock has been validly reserved for
issuance upon exercise of the Warrants.
2.2 The Company has no subsidiaries.
2.3 The Company has a duly authorized and outstanding
capitalization as set forth in the Prospectus referred to below and the
Securities conform to the description contained therein and such description
conforms with the rights set forth in the instruments defining the same.
2.4 The Company has prepared and filed with the Securities and
Exchange Commissions (the "Commission") a Registration Statement (Registration
No. ) and one or more amendments thereto covering the registration of the
Securities under the Securities Act of 1933, as amended (the "Securities
Act"), including the related Preliminary Prospectus and Amended Preliminary
Prospectus or Prospectuses. Each such Preliminary Prospectus and Amended
Preliminary Prospectus bore the legends required by the rules and regulations
of the Commission under the Securities Act (the "Rules and Regulations"). Such
Registration Statement as amended at the time it becomes effective and the
final Prospectus included therein or, if changed subsequent thereto, in the
form which is furnished to the Underwriter to enable it to offer the Shares to
the public and filed with the Commission pursuant to Rule 424 under the
Securities Act, are herein respectively called the "Registration Statement"
and the "Prospectus."
2.5 At the time the Registration Statement becomes effective and
at all times subsequent thereto up to the closing date of the offering (the
"Closing Date"), the Registration Statement and Prospectus, and any amendments
or supplements thereto, will contain all statements which are required to be
stated therein in accordance with the Securities Act and the Rules and
Regulations and will in all material respects conform to the requirements of
the Securities Act and the Rules and Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriter.
2.6 The consolidated financial statements and schedules filed with
and as part of the Registration Statement present fairly the financial
position of the Company as of the respective dates thereof for the respective
periods covered thereby, all in conformity with generally accepted principles
of accounting, prevailing in the United States, applied on a consistent basis
throughout the entire period involved.
2.7 Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and prior to the Closing
Date, except as contemplated or set forth in the Prospectus, (i) there has not
been and will not have been any material adverse change in the condition,
financial or otherwise, or in the earnings, affairs or business prospects of
the Company whether or not arising in the ordinary course of business; (ii)
the Company has not incurred any material liability or obligation, direct or
contingent, nor has it entered into any material transaction; (iii) the
Company has not and will not have paid or declared any dividend or other
distribution on its common stock; and (iv) there has not been and will not
have been any change in the certificate of incorporation of the Company.
2.8 The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated and the compliance with the terms and
conditions of this Agreement have been duly authorized by all necessary
corporate proceedings and will not conflict with or result in a breach of any
of the terms or conditions of, or constitute a default under, or with the
giving of notice or the passage of time (or both) constitute a default under,
the certificate of incorporation, as amended, or by-laws of the Company, or
any indenture, mortgage, or other agreement or instrument to which the Company
is a party or by which it or its property is bound, or any applicable law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality, court or other governmental body, domestic or foreign, having
jurisdiction over the Company or its properties.
2.9 Simon, Krowitz, Bolin & Associates P.A., 11300 Rockville Pike,
Suite 800, Rockville, MD, 20852, who is certifying the financial statements
filed with the Commission as part of the Registration Statement, is an
independent public accountant as required by the Securities Act and the Rules
and Regulations.
Any certificate relating to matters not specifically covered by
subsections 2.1 to 2.9 above signed by any officer of the Company and
delivered to the Underwriter or its counsel, the Securities and Exchange
Commission or the National Association of Securities Dealers, Inc. ("NASD") at
or prior to the Closing Date shall be deemed a representation by the Company
to the Underwriter as to the matters covered thereby.
3. Employment of Underwriter.
On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth:
3.1 The Company hereby employs the Underwriter as its
exclusive agent to sell for its account 1,200,000 Common Shares, on a "best
efforts" basis at a price of $ $8 - $10 per Share. The Underwriter agrees to
use its best efforts as agent, promptly after receipt of written notice on the
Effective Date of the Registration Statement (the "Effective Date"), to sell
the 1,200,000 Common Shares subject to the terms, provisions and conditions
hereinafter mentioned, for a period of not less than ninety (90) calendar days
which may be extended up to an additional ninety (90) calendar days with the
consent of the Company and the Underwriter.
3.1.1 All funds received from subscribers shall be made payable to the
Company
3.1.2 Deliberately Left Blank.
3.1.3 Per share of Common Stock sold, the Underwriter shall be entitled
to receive as compensation (i) a Commission of $ per Common Share (10%)
with respect to all Common Shares sold, which compensation the Underwriter
shall be entitled to deduct and retain from the proceeds of the sale of the
Common Shares prior to transmittal of payment to the Company; (ii) a
nonaccountable expense allowance of $ which is calculated at
approximately 3% of the offering proceeds, and (iii) Stock purchase warrants
(the "Underwriter's Warrants") to be sold to the Underwriter, at the closing,
at a price of $.001 per Underwriter's Warrant, at a rate of one Underwriter's
Warrant for every 10 Shares sold in the public offering herein. Each
Underwriter's Warrant will entitle the holder thereof to purchase one share of
common stock for a five year period commencing one year from the Effective
Date of the Prospectus at a price of 120% of the initial public offering
price. The Underwriter's Warrants shall contain provisions protecting the
holders thereof against dilution and are non-transferable for one year
subsequent to the Effective Date, except to Officers of the Underwriter or to
members of a selling group of registered broker-dealers or their respective
officers or partners, if any. In no event shall the Underwriter sell more
then 20% of the Shares to officers, directors or shareholders of the Company.
The Company will include the Underwriter's Warrants and the underlying
Underwriter's Stock in the registration statement to be filed under the
Securities Act regarding the Company's public offering of 1,200,000 shares of
common stock. In addition, for a period of five (5) years commencing one (1)
year from the effective date, upon the written demand of at least 50% of the
beneficial holders of the Underwriter's Warrants and/or securities underlying
the same, the Company agrees, on one occasion at the expense of the Company
(excluding underwriting discounts, commissions, fees and expenses of the
holder's counsel) and on a second occasion at the expense of such holders, to
promptly register the underlying securities for purposes of a public offering.
The Underwriter's Warrants shall be in the form annexed hereto and filed as an
exhibit to the Registration Statement. The Company has agreed that in the
event it shall cause a future Registration Statement or Offering Statement
other than a post effective amendment to be filed with the Securities and
Exchange Commission, the Underwriter shall have the right during the life of
the Warrants, to register or qualify said Warrants and/or the shares of common
stock underlying same (as the case may be) in such Registration Statement or
Offering Statement at no expense to the Underwriter.
3.2 The Underwriter may, at its discretion, form a "Selling Group" and
offer Shares for sale through certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD").
4. Offering of Common Shares.
The Company understands that the Underwriter intends to make a
public offering of the Common Shares on the terms set forth in the
Registration Statement.
5. Payment and Delivery.
Upon receipt by the Underwriter or any participating selected dealer,
investors' funds will immediately be deposited in a bank account maintained
by the Underwriter. All investors' checks, bank drafts or money orders must
be made payable to the Company. The name, address, social security or
employer identification number and number of Common Shares purchased by each
subscriber shall be included with investors' funds.
The Underwriter's Warrants shall be registered in the name of the Underwriter.
6. Certain Covenants of the Company.
The Company covenants and agrees to the extent set forth herein,
with the Underwriter as follows:
6.1 The Company shall not at any time, whether before or after the
Registration Statement has become effective, file or make an amendment or
supplement to the Registration Statement or Prospectus of which the
Underwriter or its counsel shall not have previously been advised and
furnished a copy at least (ten) 10 days prior to filing, or to which the
Underwriter or Friedman, Krauss & Zlotolow , its counsel, shall object in
writing.
6.2 The Company shall use its best efforts to cause the
Registration Statement to become effective and shall advise the Underwriter
immediately, and confirm the advice in writing (i) when the Registration
Statement or any post-effective amendment to the Registration Statement shall
have become effective or any supplement to the Prospectus or any amended
Prospectus shall have been filed; (ii) of any request of the Commission for
amendment or supplementation of the Registration Statement or Prospectus or
for additional information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary or amended
preliminary Prospectus; and (iv) of the suspension of the qualification of the
common shares for offering or sale in any jurisdiction, or of the institution
of any proceedings for any of such purposes. The Company will use its best
efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and to obtain as soon as possible the
lifting thereof if issued.
6.3 The Company shall deliver to the Underwriter, without
charge, from time to time until the Effective Date of the Registration
Statement, as many copies of each preliminary and amended preliminary
Prospectus as the Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Securities
Act. The Company shall deliver to the Underwriter, without charge, as soon
as the
Registration Statement shall have become effective and thereafter from time to
time as requested, such number of copies of the Prospectus (as supplemented or
amended, if the Company shall have made any supplements or amendments to the
Prospectus) as the Underwriter may reasonably request. The Company has
furnished or shall furnish to the Underwriter two (2) signed copies of the
Registration Statement as originally filed and of all amendments thereto,
whether filed before or after the Registration Statement becomes effective
including in each case copies of all exhibits filed therewith and signed
copies of all consents and certificates of experts, and has furnished or will
furnish to the Underwriter, conformed copies of the Registration Statements as
originally filed and each of said amendments (exclusive of exhibits) in such
quantities as may be reasonably requested.
6.4 The Company shall comply with the Securities Act and the Rules and
Regulations thereunder so as to permit the continuance of sales of and
dealings in the common shares under the Securities Act. If at any time when a
prospectus is required to be delivered under the Securities Act in connection
with such sales and dealings, and an event shall have occurred as a result of
which it is necessary in the opinion of counsel to the Company and the
Underwriter's counsel to amend or supplement the Prospectus in order to make
the statements therein not untrue or misleading or to make the Prospectus
comply with the Securities Act, the Company shall furnish the Underwriter
without charge such number of copies as the Underwriter may reasonably request
of the Prospectus (in form and substance satisfactory to the Underwriter's
counsel), appropriately amended or supplemented to comply with the
requirements of Section 10 of the Securities Act.
6.5 The Company shall use its best efforts to qualify, and to cooperate
with the Underwriter in an endeavor to qualify the Common Shares for sale
under the laws of such jurisdictions as the Underwriter may reasonably request
and will comply to the best of its ability with such laws so as to permit the
continuance of sales of and dealings in the Common Shares thereunder. The
Company, however, shall not be obligated to qualify as a foreign corporation
or subject itself to taxation as doing business in any such jurisdiction that
it did not "blue sky" in. In each jurisdiction where the Common Shares shall
have been qualified as above provided, the Company will make and file such
statements and reports in each year as are or may be required by the laws of
such jurisdiction.
6.6 The Company, within three (3) months following the close of it first
fiscal year subsequent to the Effective Date and at least annually thereafter,
shall issue consolidated financial statements to its stockholders reported
upon by an independent public accountant.
6.7 The Company agrees neither to sell nor to transfer any shares of
common stock of the Company or any options to purchase such common stock other
than that sold or contemplated to be sold hereunder, for a period of one
hundred and eighty (180) days after the Effective Date without the prior
written consent of the Underwriter, and prior to discussion.
6.8 For a period of five (5) years after the Closing Date, the Company
will furnish to the Underwriter quarterly consolidated statements of income of
the Company for, and within sixty (60) days after the expiration of, each of
the first three (3) quarters of each fiscal year (which need not be audited)
deliver to the Underwriter within one hundred twenty (120) days after the
expiration of each fiscal year, annual consolidated balance sheets and
consolidated statements of income and surplus of the Company (which shall be
audited) promptly deliver to the Underwriter copies of all such documents,
reports and information as shall be of general interest, furnished by the
Company to its stockholders generally; and shall promptly deliver to you
copies of all documents, reports and information required to be filed by the
Company with the Commission, if, and so long as the Company has a consolidated
basis to the extent the accounts of the Company are required to be
consolidated under the Rules and Regulations, and if such financial statements
were required to be prepared in accordance with the Rules and Regulations.
6.9 In addition to the registration of the Underwriter's Warrants and
the underlying Underwriter's Stock pursuant to the Company's proposed public
offering of 1,200,000 Common Shares, the Company agrees to register the
Underwriter's Warrants and/or Underwriter's Stock under the following
circumstances:
6.9.1 The Company shall once, at the Company's sole expense, commencing
on the Effective Date, register the Underwriter's Warrants and/or
Underwriter's Stock upon the written request of the Underwriter, during the
exercise period of the Underwriter's Warrants exercise term, and shall keep
effective for 150 days such Registration Statements relating thereto as may be
filed under the Securities Act of 1933. The Company shall use its best
efforts to file with the Commission as promptly as practicable, a
post-effective amendment or other Registration Statement declared effective
and remaining effective until the securities registered thereby have been sold
and a Prospectus is no longer required to be delivered, and to qualify the
Underwriter's Warrants and/or Underwriter's Stock under the "blue sky" laws of
such jurisdictions as the Underwriter shall reasonably request.
6.9.2 If, at any time, or from time to time, for a period of six (6)
years from the Effective Date, the Company proposes to file a Registration
Statement with the Commission with respect to any securities of the Company,
the Company shall, at least thirty (30) days prior to such filing, give
written notice thereof to the holders of the Underwriter's Warrants and/or
Underwriter's Stock and if, within twenty (20) days after receipt of such
notice, the holders request inclusion of any Underwriter's Warrants and/or
Underwriter's Stock in such Registration Statement, the Company will include
such Underwriter's Warrants and/or Underwriter's Stock in such Registration
Statement. During this seven (7) year period, the Company will pay and bear
all costs and expenses for a single registration in connection with
registering the Underwriter's Warrants and/or Underwriter's Stock, except for
the fees of the Underwriter's counsel in connection therewith and except for a
post-effective amendment that might be filed.
6.9.3 The Company shall supply the Underwriter with copies of the
Registration Statement and of the Prospectus included therein in such
quantities as may reasonably be necessary for purposes of any promised
offering pursuant to clauses 6.9.1 or 6.9.2 above and the Company shall bear
all expenses necessary and incidental to the performance of its obligations
under such clauses.
6.9.4 With respect to any registration statement filed pursuant to
clauses 6.9.1 or 6.9.2 above, the Company and the Underwriter agree to
indemnify each other to the same extent as provided in Section 8 hereof.
6.10 The Company shall pay all costs and expenses in connection with (i)
the preparation, printing and filing of the Registration Statement (including
financial statements and exhibits), preliminary prospectuses and the
Prospectus and any amendments or supplements thereto; (ii) the printing of
this Agreement and all related documents; (iii) the printing and delivery of
certificates for the Securities; (iv) the cost of furnishing to the
Underwriter copies of the Registration Statement, preliminary and amended
preliminary prospectuses and the Prospectus and any amendments or supplements
thereto as herein provided; (v) Blue Sky and NASD filing; and (vi) a
non-accountable expense allowance of $. (3%) per Common Share payable to
the Underwriter for reimbursement of out-of-pocket expenses.
7. Conditions Precedent to the Underwriter's Obligation.
The obligations of the Underwriter hereunder are subject to the
accuracy (as of the date hereof and the Closing Date) of the compliance with
the representations and warranties of the Company, to the accuracy of the
written statements of the officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
7.1 The Registration Statement shall have become effective not later
than 5:30 p.m., New York City time, on [ ], or at such later time or on
such later date as the Underwriter may agree to in writing, and prior to the
Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been instituted or shall be pending or, to the Underwriter's knowledge
shall be contemplated by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Friedman, Krauss & Zlotolow, counsel for the
Underwriter.
7.2 At the Closing Date, there shall have been delivered to the
Underwriter a signed opinion of Schonfeld & Weinstein, counsel for the
Company, dated as of the Closing Date, satisfactory in form and substance to
Friedman, Krauss & Zlotolow, to the effect:
7.2.1 The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware and has full
corporate power to own its properties and to conduct its business as such
business as described in the Prospectus, and the Company is qualified to do
business as a foreign corporation in good standing in every jurisdiction in
which the ownership of its properties and the conduct of its business requires
such qualification.
7.2.2 The Company has no subsidiaries.
7.2.3 The Stock has been duly authorized and validly issued and is fully
paid and non-assessable, and no holder thereof will be subject to personal
liability by reason of being a stockholder, and all corporate action required
to be taken by the Company for the authorization, issue and sale of the Stock
has been validly and sufficiently taken, and the certificates representing the
Stock are in proper legal form.
7.2.4 The Warrants and the Underwriter's Warrants have been duly
authorized, executed and delivered by the Company and are validly issued and
legally binding obligations of the Company, enforceable in accordance with
their terms.
7.2.5 The Underlying Underwriter's Stock has been duly and validly
authorized and reserved for issuance upon exercise of the Underwriter's
Warrants and when issued in accordance with the terms of the Underwriter's
Warrants shall be validly issued, fully paid and non-assessable, and no holder
thereof shall be subject to personal liability by reason of being a
stockholder.
7.2.6 The Securities are not subject to the preemptive rights of any
stockholder of the Company.
7.2.7 The Company has a duly authorized capitalization as set forth in
the Prospectus and the Securities conform to the description thereof contained
therein and such description conforms to the rights set forth in the
instruments defining the same.
7.2.8 The Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted, are pending,
or are contemplated under the Securities Act.
7.2.9 The Registration Statement, the Prospectus and any amendment or
supplement thereto (except for the financial statements and other financial
date included therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations; such counsel has participated in
the preparation of the Registration Statement and Prospectus and such counsel
has no reason to believe that either the Registration Statement or the
Prospectus or any such amendment or supplement (except for such financial
statements and other financial data included therein, as to which such counsel
need express no opinion) contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
7.2.10 The descriptions in the Registration Statement and Prospectus of
the contracts and documents therein described are accurate and fairly present
the information required to be stated.
7.2.11 Such counsel does not know of any statutes or regulations or
legal or governmental proceedings required to be described in the Registration
Statement and Prospectus which are not described as required, nor of any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required.
7.2.12 This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company enforceable
in accordance with its terms, except to the extent limited by applicable
bankruptcy and similar laws, and except as enforceability of the
indemnification provisions may be limited under federal securities laws.
7.2.13 The execution and delivery of the Agreement, the consummation of
transactions herein contemplated and the fulfillment of the terms hereof by
the Company will not result in the breach of any law or legal requirements
(subject to the provisions of clause 8.2.), and will not conflict with, or
result in the breach of, any term or provision of, or constitute a default
under, or with the giving of notice or the passage of time (or both)
constitute a default under, the certificate of incorporation, or by-laws of
the Company or any indenture, mortgage, deed of trust, lease, note, court
order or other agreement or instrument known to such counsel to which the
Company is a party by succession or otherwise, or by which it is bound.
7.2.14 So far as counsel is aware, the Company is not in default under
any material agreement or instrument to which it is a party.
7.2.15 Except for state "blue sky" or securities laws (as to which such
counsel need express no opinion) and except for any necessary registration
under the Securities Act of the Underlying Stock and Underwriter's Stock, no
authority is required for the valid authorization, issuance, sale and/or
delivery of the Securities or, if so required, all such authorizations,
approvals, consents and licenses, specifying the same, have been obtained and
are in full force and effect.
Such opinion may be based, insofar as it relates to factual matters
and/or information with respect to which is in the possession of a
corporation, upon the certificate of or representations by an officer or
officers of such corporation, unless such counsel knows that such certificate
or representations are erroneous. To the extent that any such opinion relates
to matters involving the laws of a jurisdiction in which counsel rendering
such opinion is not licensed to practice, such opinion may also be based upon
an opinion of counsel, licensed to practice in such other jurisdiction,
satisfactory to Friedman, Krauss & Zlotolow.
7.3 At the Closing Date, there shall have been delivered to the
Underwriter a signed opinion of Schonfeld & Weinstein, Esq., counsel for the
Company, in form and substance reasonable satisfactory to the Underwriter,
dated as of the Closing Date, with respect to the incorporation and legal
existence of the Company, the authorized capital stock of the Company, the
validity of the Securities, the due authorization and execution by the Company
of this Agreement and Registration Statement, and such other related matters
as the Underwriter may require.
7.4 At the Closing Date, (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the
Securities Act and the Rules and Regulations and in all material respects
shall conform to the requirements of the Securities Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a
material fact or shall omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) the
Company shall not have declared, paid or made any dividend or distribution of
any kind on its common stock; (iii) since the respective dates as of which
information is given there shall have been no material adverse change in the
business, properties or condition, financial or otherwise, of the Company from
that set forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement indicates might occur after the
Effective Date, and there shall have been no material transaction, contract or
agreement entered into by the Company other than in the ordinary course of
business which is not referred to in the Registration Statement; (iv) no
action, suit or proceeding at law or in equity shall be pending or, to the
knowledge of the Company, threatened against or affecting the Company which
would be required to be set forth in the Registration Statement other than as
set forth therein, and no proceedings shall be pending or to the knowledge of
the Company, threatened against the Company before or by any Federal, State or
other governmental commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or income of the Company other than as
set forth in the Registration Statement; and (v) to the best knowledge of the
Company, no labor disturbance by the employees of the Company shall exist or
be imminent which might materially adversely affect the business, operations,
financial condition or income of the Company, except as set forth in the
Registration Statement or the Prospectus. The Underwriter shall have received
at the Closing Date, a certificate of the President of the Company, dated as
of the Closing Date, evidencing compliance with the provisions of this
subsection 7.4.
7.5 At the time that this Agreement is executed by the Company and at
the Closing Date, the Underwriter shall have received a letter from Simon
Krowitz Bolin & Associates, P.A., Certified Public Accountants, dated as of
the date this Agreement is executed by the Company and as of the Closing Date,
confirming that they are an independent public accounting firm within the
meaning of the Securities Act and the Rules and Regulations and stating in
effect (i) that in their opinion the financial statements and schedules
examined by him and included or incorporated by reference in the Registration
Statement and Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Rules and
Regulations to the extent required for registration statements on Form SB-2
and (ii) that on the basis of a reading of the unaudited financial statements
and schedules (if any) included in the Registration Statement, and of the
latest available unaudited interim financial statements prepared by the
Company (if any) consultations with and inquiries of officers of the Company
responsible for financial and account matters, a reading of the minute books
of the Company, and such other procedures and inquiries (if any) specified in
such letter, nothing has come to their attention which gives them reason to
believe that (a) the unaudited financial statements and schedules (if any)
included in the Registration Statement and Prospectus do not comply as to form
in all material respects with the applicable account requirements of the
Securities Act and the Rules and Regulations or were not prepared in
accordance with generally accepted accounting principles and practices
prevailing in the United States, applied on a basis consistent with those
followed in the preparation of such audited financial statements or would
require any material adjustments for a fair and reasonable presentation of the
information purported to be shown or that (b) during the period to be
specified dated not more than five (5) days prior to date of such letter there
was no change in the capital stock or long-term debt of the Company, except as
set forth in or contemplated by the Registration Statement and Prospectus.
7.6 All proceedings taken at or prior to the Closing Date in connection
with the issue and sale of the Securities shall be satisfactory in form and
substance to counsel for the Underwriter, and such counsel shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the
purpose of enabling them to pass upon matters referred to in subsection 7.3 of
this Section 7 and upon compliance with any of the conditions herein
contained.
Should any of the conditions specified above in this Section 7 not
have been fulfilled, this Agreement may be terminated by the Underwriter on
notice to the Company.
8. Indemnification.
8.1 The Company agrees to indemnify and hold harmless the Underwriter ,
its counsel and each person, firm or corporation, if any, who controls the
Underwriter within the meaning of Section 15 of the Securities Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Act or under any other statute or at common law or otherwise, and except as
hereinafter provided, will reimburse the Underwriter and each such controlling
person, firm or corporation, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any and all actions which such expenses, whether or not resulting in
any expenses, liabilities or actions, which such expenses arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, in any preliminary or amended
prospectus or in the Prospectus (or the Registration Statement or Prospectus
as from time to time amended or supplemented by the Company) or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such untrue statement or omission
was made in such Registration Statement, preliminary or amended preliminary
prospectus or Prospectus (or the Registration Statement or Prospectus as from
time to time amended or supplemented by the Company) in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Underwriter, expressly for use therein. Promptly after
receipt by the Underwriter, the Underwriter's counsel or any person, firm or
corporation controlling such Underwriter of notice of the commencement of any
action in respect of which indemnity may be sought against the Company under
this Section 8, the Underwriter shall notify the Company in writing of the
commencement thereof and, subject to the provisions hereinafter stated, the
Company shall have the right to assume the defense of such action (including
the employment of counsel and the payment of expenses) insofar as such action
shall relate to any alleged liability in respect of which indemnity may be
sought against the Company. The Underwriter, its counsel or any such
controlling person, firm or corporation shall have the right to employ
separate counsel in any
such action and to participate in the defense thereof but the fees and
expenses of such counsel shall not be at the expense of the Company unless (i)
the Company does not assume such defense or (ii) the employment of such
counsel has been specifically authorized by the Company or (iii) counsel
employed by the Company to conduct
such defense is in the sole opinion of the Underwriter not effective. The
Company shall not be liable to indemnify any person for any settlement of any
such action effected without the Company's consent.
8.2 The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors and each of its officers who have signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act from and against any
and all losses, claims, damages, expenses or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act or under
any other statute or at common law or otherwise and, except as hereinafter
provided, will reimburse the Company and each such director or officer and
each such controlling person, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any and all actions, whether or not resulting in any liability,
insofar as such losses, claims, damages, expenses, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
but only insofar as any such statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter expressly for use therein; provided,
however, that the Underwriter shall only be responsible for its own
misstatements or omissions. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
an Underwriter under this Section 8, the indemnified party will notify the
Underwriter in writing of the commencement thereof, and the Underwriter shall,
subject to provisions hereinafter stated, have the right to assume the defense
of such action (including the employment of counsel and the payment of
expenses) insofar as such action shall relate to any alleged liability in
respect of which indemnity may be sought against the Underwriter. The Company
and each such director, officer or controlling person shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the expense
of the Underwriter whose purported omissions or misstatements were responsible
for the initiation of the claim unless the employment of such counsel has been
specifically
authorized by the Underwriter. The Underwriter whose purported omissions or
misstatements were responsible for the initiation of the claim shall not be
liable to indemnify any person for any settlement of any such action effected
without the Underwriter's consent.
9. Representations, Warranties and Agreements to Survive Delivery.
The representations, warranties, indemnities, agreements and other
statements of officers of the Company set forth in or made pursuant to this
Agreement and the indemnity agreement of the Underwriter contained in Section
8 hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company of the Underwriter or any
controlling person thereof and will survive delivery of any payment for the
Securities.
10. Effectiveness of Obligation and Underwriter's Termination.
10.1 The Underwriter agrees to make a public offering of the Common
Shares covered by this Agreement as soon after the Effective Date as is
advisable, in accordance with and as set forth in such Registration Statement.
Notwithstanding any of the terms and provisions hereof, this Agreement may be
terminated at any time prior to the Closing Date by the Underwriter if the
Underwriter shall determine, in its sole uncontrolled discretion, that the
market conditions not warrant the offering at this time or since the
respective dates as of which information was given in the Registration
Statement or Prospectus, the Company shall have sustained a loss, whether or
not insured, by reason of fire, flood, accident or other calamity otherwise,
which substantially affects the value of the property of the Company as a
whole, or materially interferes with the operation of the business of the
Company as a whole, and which in the sole judgment of the Underwriter shall
render it impracticable to offer for sale or to enforce contracts made by the
Underwriter for the sale of the Common Shares or, if as a result of action by
the New York Stock Exchange, Inc., the American Stock Exchange, the NASD, the
Commission, or any Federal or State agency, or by action of the Congress or by
Executive Order, trading in securities generally on either of such Exchanges
or in the over-the-counter market shall have been suspended or limited or
minimum prices shall have been established on either of such Exchanges or in
the over-the-counter market or any new restrictions on transactions in
securities materially limiting the free market for securities shall generally
have been established, or if a banking moratorium shall have been declared by
either Federal or New York State authorities, or if some other catastrophe,
natural calamity, act of God, act of a public enemy, labor dispute or other
event occurs, the effect of which is materially to disrupt the financial
markets in the United States or transactions materially in the aggregate,
related to the offering, or the financial condition, business practices,
officers or directors of the Company have not fulfilled the Underwriter's
expectations. If this Agreement shall be terminated pursuant to this Section
10, the Underwriter shall not be responsible for any expenses of the Company
or others for any charges or claims and neither the Company nor the
Underwriter shall be under any obligation under this Agreement, except that
(i) the Company shall remain liable for the payment of expenses referred to in
Section 6 hereof and (ii) the Company and the Underwriter shall retain their
respective liabilities pursuant to Section 8.1 and 8.2 hereof.
10.2 If this Agreement shall be terminated pursuant to Section 7 or this
Section 10 or of the offering provided for herein is not consummated, and/or
any condition to the Underwriter's obligation hereunder is not satisfied, or
because of any refusal, inability or failure on the part of the Company to
comply with any of the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company Shall be unable to perform its
obligations under this Agreement, the Company shall not be liable to the
Underwriter for damages on account of loss of anticipated profits arising out
of the transactions covered by this Agreement, but the Company shall pay all
out-of-pocket expenses incurred by the Underwriter in contemplation of the
performance by them of their obligations hereunder, including the fees and
disbursements of its counsel and accountants and its printing and traveling
expenses and postage, telephone and telegraph charges, up to a maximum of
$5,000, and the company shall remain liable to the extent provided in Section
6.10 and Section 8.1 hereof and the Underwriter shall remain liable to the
extent provided in Section 8.2.
11. Brokerage.
The Company shall indemnify and hold harmless the Underwriter from
and against any claim by any person with whom the Company has dealt, and the
Underwriter shall indemnify and hold harmless the Company from and against any
claim by any person with whom the Underwriter has dealt, for a brokerage
commission with the sale of the Common Shares hereunder, as well as all
liabilities, costs, charges and expenses (including without limitation,
reasonable fees and expenses of counsel) which the Underwriter or the Company,
as the case may be, may incur or pay as the result of investigating, defending
or settling any such claim or responding to any judgment based thereon, or in
connection therewith.
12. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided, shall be delivered at, or mailed or telegraphed to, the
following addresses: if to the Underwriter, to First Madison Securities, Inc.,
545 Madison Avenue, 6th Floor, New York, NY 10022 with copies to Friedman,
Krauss & Zlotolow, 888 7th Avenue, 11th Floor, New York, NY 10106 for
underwriter. If to the Company, to Bookdigital.com Inc., Attention: Don L.
Rose, 65 Broadway, 5th Floor, New York, NY 10006.
<PAGE>
13. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of
the Underwriter and, to the extent expressed, any person, firm or corporation
controlling the Underwriter, the Company, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns and no other person shall
acquire or have any right under or by virtue of the Agreement. The terms
"successor" or "successors and assigns" shall not include any purchases, as
such purchaser, from the Underwriter, of the Stock, Warrants or Underlying
Stock. All of the obligations of the Underwriter and the Company hereunder
are several.
14. Governing Law.
This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
,1999.
BOOKDIGITAL.COM INC.
BY:
DON L ROSE, Chief Executive Officer
Confirmed and accepted
as of the date first above written:
FIRST MADISON SECURITES, INC.
By:
RAY VAHAB, Chairman
<PAGE>
CERTIFICATE OF INCORPORATION OF
BOOKDIGITAL. COM INC.
FIRST. The name of this corporation shall be:
BOOKDIGITAL.COM INC.
SECOND. Its registered office in the State of Delaware is to be
located at
1013 Centre Road, in the City of Wilmington, County of New Castle, 19805, and
its registered agent at such address is THE COMPANY CORPORATION.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this
corporation is authorized ro
issue is:
One thousand Five Hundred (1,500) shares without par value.
FIFTH. The name and mailing address of the incorporator is as
follows:
Kathleen Crowley
The Company Corporation
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt,
amend or repel the
by-laws.
IN WITNESS WHEREOF, The undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this twenty-fifth day of March, A.D. 1999.
Kathleen Crowley
Incorporator
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BOOKDIGITAL. COM INC.
BOOKDIGITAL.COM INC., a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation at a
meeting duly convened
and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article Fourth of the Certificate of
Incorporation be amended to read as follows:
FOURTH: The total number of shares of stock which this
corporation is authorized to
issue is:
Twenty -Million (20,000,000) shares with par value of One Tenth of One
Cent ($.001) per share, amounting to Twenty Thousand Dollars ($20,000.00).
SECOND: That the said amendment has been consented to and
authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Sections 242 and
228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by
, this
14th day of April A.D. 1999
Authorized Officer
<PAGE>
BY- LAWS
of
Bookdigital.com Inc.
ARTICLE I - OFFICES
SECTION I. REGISTERED OFFICE. The registered office shall be established
and maintained at 1013 Centre Road, in the city of Wilmington, in the County
of Dover, in the State of Delaware
SECTION 2. OTHER OFFICES. The corporation may have other offices either
within or without the State of Delaware, at such place or places as the Board
of Directors may from time to time appoint or the business of the corporation
may require.
ARTICLE II - MEETING OF STOCKHOLDERS
SECTION I. ANNUAL MEETINGS. --Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. In
the event the Board of Directors fails to so determine the time, date and
place of meeting, the annual meeting of stockholders shall be held at the
registered office of the corporation in New York, on the first Monday in
January.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors
and may transact such other corporate business as shall be stated in the
notice of the meeting.
SECTION 2. OTHER MEETINGS. - - Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the
meeting.
SECTION 3. VOTING. - - Each stockholder entitled to vote in accordance
with the terms and provisions of the Certificate of Incorporation and these
By-Laws shall be entitled to one vote, in person or by proxy, for each share
of stock entitled to vote held by such stockholder, but no proxy shall be
voted after three years from its date unless such proxy provides for a longer
period. Upon the demand of any stockholder, the vote for directors and upon
any question before the meeting shall be by ballot. All elections for
directors shall be decided by plurality vote; all other questions shall be
decided by majority vote except as otherwise provided by the Certificate of
Incorporation or the laws of the State of Delaware.
SECTION 4. STOCKHOLDER LIST. -- The officer who has charge of the
stock ledger of the corporation shall at least 10 days before each meeting of
stockholders prepare a complete alphabetical addressed list of the
stockholders entitled to vote at the ensuing election, with the number of
shares held by each. Said list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall be available for inspection at
the meeting.
SECTION 5. QUORUM. -Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or
by proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At any such adjourned meeting at
which the requisite amount of stock entitled to vote shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed; but only those stockholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 6. SPECIAL MEETINGS.- Special meetings of the stockholders,
for any purpose, unless otherwise prescribed by statute or by the Certificate
of Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the
directors or stockholders entitled to vote. Such request shall state the
purpose of the proposed meeting.
SECTION 7. NOTICE OF MEETINGS. - - Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than fifty days before the date of the meeting.
SECTION 8. BUSINESS TRANSACTED - -No business other than that stated
in the notice shall be transacted at any meeting without the unanimous consent
of all the stockholders entitled to vote thereat.
SECTION 9. ACTION WITHOUT MEETING. --Except as otherwise provided by
the Certificate of Incorporation, whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who would have been entitled by vote
upon the action is such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III - DIRECTORS
SECTION I. NUMBER AND TERM. --The number of directors shall be not
less than three. The directors shall be elected at the annual meeting of the
stockholders and each director shall be elected to serve until his successor
shall be elected and shall qualify. The number of directors may not be less
than three except that where all the shares of the corporation are owned
beneficially and of record by either one or two stockholders, the number of
directors may be
less than three but not less than the number of stockholders.
SECTION 2. RESIGNATIONS. -- Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified,
at the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3 VACANCIES. - If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until
his successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. -- The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of a majority
of the directors, though less than a quorum, or, by the affirmative vote of a
majority in interest of the stockholders, at the annual meeting or at a
special meeting called for that purpose, and by like vote the additional
directors may be chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualify.
SECTION 6. COMPENSATION. - - Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any from serving the corporation in any other capacity as an officer,
agent or otherwise, and receiving compensation therefor.
SECTION 7. ACTION WITHOUT MEETING.- Ant action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken with out a meeting, if prior to such action a
written consent thereto is signed by all members of the board, or of such
committee as the case may be, and such written consent is filed with the
minutes of proceedings of the board or committee.
ARTICLE IV - OFFICERS
SECTION I. OFFICERS. - - The officers of the corporation shall consist
of a President, a Treasurer, and a Secretary, and shall be elected by the
Board of Directors and shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one
or more Vice-Presidents and such Assistant Secretaries and Assistant
Treasurers as it may deem proper. None of the officers of the corporation need
be directors. The officers shall be elected at the first meeting of the Board
of Directors after each annual meeting. More than two offices may be held by
the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - - The Board of Directors may
appoint such officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such power and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. -- The Chairman of the Board of Directors if one
be elected, shall preside at all meetings of the Board of Directors and he
shall have and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 4. PRESIDENT. -- The President shall have the general powers
and duties of supervision and management usually vested in the office of
President of a corporation. He shall preside at all meetings of the
stockholders if present thereat, and in the absence or non-election of the
Chairman of the Board of Directors, at all meetings of the Board of Directors,
and shall have general supervision, direction and control of the business of
the corporation Except as the Board of Directors shall authorize the execution
thereof in some other manner, he shall execute bonds, mortgages, and other
contracts in behalf of the corporation, and shall cause the seal to be affixed
to any instrument requiring it and when so affixed the seal shall be attested
by the signature of the Secretary or the Treasurer or an Assistant Secretary
Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. -Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.
SECTION 6. TREASURER. -The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers
for such disbursements. He shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board of Directors,
he shall give the corporation a bond for the faithful discharge of his duties
in such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY. --The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders,
upon whose requisition the meeting is called as provided in these By-Laws. He
shall record all the proceedings of the meetings of the corporation and of
directors in a book to be kept for that purpose. He shall keep in safe custody
the seal of the corporation, and when authorized by the Board of Directors,
affix the same to any instrument requiring it, and when so affixed, it shall
be attested by his signature or by the signature of any assistant secretary.
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.
ARTICLE V
SECTION I CERTIFICATES OF STOCK.- Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary of the corporation, certifying the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of
any class, the designations, preferences and relative participating, optional
or other special rights of each class of stock or. series thereof and the
qualifications, limitations, or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class of
series of stock, provided that, except as other wise provided in section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Where a certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a
registrar other than the corporation or its employee, the signatures of such
officers may be facsimiles.
SECTION 2. LOST CERTIFICATES --New certificates of stock may be issued
in the place of any certificate therefore issued by the corporation, alleged
to have been lost or destroyed, and the directors may, in their discretion,
require the owner of the lost or destroyed certificate or his legal
representatives, to give the corporation a bond, in such sum as they may
direct, not exceeding double the value of the stock, indemnify the corporation
against it on account of the alleged loss of any such new certificate. Stock
of the corporation shall be transferable only upon its books by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, and upon such transfer the old certificates shall be
surrendered to the corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers, or to such other persons as the
directors may designate, by who they shall be cancelled, and new certificates
shall thereupon be issued. A record shall be made of each transfer and
whenever a transfer shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than
ten days before the -day of such meeting, nor more than sixty days prior to
any other action. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of
Incorporation the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividends there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 7. FISCAL YEAR. -- The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS - All checks, drafts, or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the corporation shall be signed by the officer or officers, agent or agents
of the corporation, and in such manner as shall be determined from time to
time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE - Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatever is required to be given under the pro-
visions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed proper notice.
ARTICLE VI - CLOSE CORPORATIONS: MANAGEMENT BY SHAREHOLDERS
If the certificate of incorporation of the corporation states that the
business and affairs of the corporation shall be managed by the shareholders
of the corporation rather than by a board of directors, then, whenever the
context so requires the shareholders of the corporation shall be deemed the
directors of the corporation for purposes of applying any provision of these
by-laws.
ARTICLE VII - AMENDMENTS
These By-Laws may be altered and repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
thereof is contained in the notice of such special meeting by the affirmative
vote of a majority of the stock issued and outstanding or entitled to vote
thereat, or by the regular meeting of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice thereof is contained in the notice of such special
meeting.
<PAGE>
July 23, 1999
Securities and Exchange Commission
Washington, D.C.
Re: Bookdigital.com, Inc.
To Whom It May Concern:
Bookdigital.com, Inc.(the "Company") is a corporation duly incorporated and
validly existing and in good standing under the laws of the state of Delaware.
The Company has full corporate powers to own its property and conduct its
business, as such business is described in the prospectus. The Company is
qualified to do business as a foreign corporation in good standing in every
jurisdiction in which the ownership of property and the conduct of business
requires such qualification.
This opinion is given in connection with the registration with the Securities
and Exchange Commission of one hundred thousand (1,200,000) shares of common
stock at a maximum offering price of $10.00 per Share, for sale in the
Company's proposed public offering.
We have acted as counsel to the company in connection with the preparation of
the Registration Statement on Form SB-2, pursuant to which such Shares are
being registered and, in so acting, we have examined the originals and copies
of the corporate instruments, certificates and other documents of the Company
and interviewed representatives of the Company to the extent we deemed it
necessary in order to form the basis for the opinion hereafter set forth. In
such examination we have assumed the genuineness of all signatures and
authenticity of all documents submitted to us as certified or photostatic
copies. As to all questions of fact material to this opinion which have not
been independently established, we have relied upon statements or certificates
of officers or representatives of the Company.
All of the 1,200,000 Shares being registered are now authorized but unissued
shares.
Based upon the foregoing, we are of the opinion that the 1,200,000 Shares of
Common Stock of the Company being registered for sale by the Company, when
issued and sold pursuant to this Registration Statement will be legally
issued, fully paid and non-assessable and there will be no personal liability
to the owners thereof.
The undersigned hereby consents to the use of this opinion in connection with
such Registration Statement and its inclusion as an exhibit accompanying such
Registration Statement.
Very truly yours,
SCHONFELD & WEINSTEIN, L.L.P.
SCHONFELD & WEINSTEIN, L.L.P.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated June 23, 1999, in this registration statement (Form SB-2) of
Bookdigital.com, Inc.
Simon Krowitz Bolin & Associate, P.A.
Certified Public Accountants
Simon Krowitz Bolin & Associates, P.A.
Dated: July 16, 1999
<PAGE>
To The Board of Directors of
Bookdigital.com, Inc.
Re: Bookdigital.com, Inc.
SCHONFELD & WEINSTEIN, L.L.P. does hereby consent to the use of our opinion
dated July 23, 1999, to Bookdigital.com, Inc. to be used and filed in
connection with the SB-2 Registration Statement and Prospectus, as filed with
the Securities and Exchange Commission.
Schonfeld & Weinstein, L.L.P.
SCHONFELD & WEINSTEIN, L.L.P.
Dated: July 23, 1999
