FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HARBOUR ENTERTAINMENT INC.
(Formerly: BIG DOG ENTERTAINMENT, INC.)
(Exact Name Of Small Business Issuer As Specified In Its Charter)
DELAWARE 11-341181
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NUMBER)
100A GARY WAY
RONKONKOMA, NEW YORK 11779
(631) 738-1010
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
MARLOWE R. WALKER, PRESIDENT
100A GARY WAY
RONKONKOMA, NEW YORK 11779
(631) 738-1010
(ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
Copy to:
DAVID H. LIEBERMAN, ESQ.
BLAU, KRAMER, WACTLAR & LIEBERMAN, P.C.
100 JERICHO QUADRANGLE, SUITE 225
JERICHO, NEW YORK 11753
(516) 822-4820
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount to be Proposed Minimum Proposed Maximum Amount of
of Securities to be Registered Registered Offering Price (1) Offering Price (1) Registration Fee
------------------------------ ------------ ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common stock . . . . . . . . . 1,715,000 $7.00 $12,000,000 $3,168
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933, as amended.
</FN>
</TABLE>
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 SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 30, 2000.
1,715,000 SHARES
HARBOUR ENTERTAINMENT INC.
COMMON STOCK
This is an initial public offering of 1,715,000 shares (the "Shares") of
common stock of Harbour Entertainment Inc. ("Harbour" or the "Company"). The
initial public offering price will be $7.00 per share. The shares are being
offered for sale by Russo Securities, Inc. (the "Underwriter") on a "best
efforts" basis (the "Offering") for a minimum of $8 million and maximum of $12
million. The Offering will expire thirty days after the effective date of the
Registration Statement for this Offering. The Company has an option to extend
the expiration date of this Offering for an additional thirty days. If the
Underwriter does not receive a minimum of $8 million in sale proceeds from the
Offering as of the expiration of the Offering, the Offering will be terminated
and all amounts paid for the Shares will be returned by the Company to the
purchasers of the Shares. All funds received by the Underwriter will be held in
an escrow account until the Underwriter has received a minimum of $8 million in
sale proceeds from the Offering. The escrow account shall be maintained at
Staten Island Savings Bank, the escrow agent. The Underwriter will receive a 10%
discount on the price for Shares purchased by the Underwriter.
Prior to this offering, there has been no public market for our common stock.
We will be applying to list our common stock on the Nasdaq Small Cap Market
under the symbol "BDEI".
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 6 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
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 THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Total Per Share
--------------------- ---------
Minimum Maximum
------- -------
<S> <C> <C> <C>
Initial public offering price. . . . . . . . . $8,000,000 $12,000,000 $7.00
Underwriting discounts and commissions (10%) . $ 800,000 $ 1,200,000 $7.00
Proceeds, before expenses, to Harbour. . . . . $7,200,000 $10,800,000 $7.00
</TABLE>
We have issued to the underwriters warrants to purchase up to 171,500
additional shares at a price which is equal to 110% of the initial public
offering price.
Delivery of the shares of common stock will be made on or about ______,
2000, in New York, New York, against payment in immediately available funds.
RUSSO SECURITIES, INC.
PROSPECTUS DATED , 2000
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with more detailed
information and the Company's combined financial statements and the notes to
those statements appearing elsewhere in this prospectus. This summary contains
material terms and provisions that investors should consider before investing in
our common stock.
Our Business
Harbour Entertainment Inc. is a development stage entertainment company
engaged in film and music production and distribution.
By operating through three distinct divisions, we have developed a diverse,
strategic approach to become competitive in the entertainment industry. Our
current divisions are:
-- Feature Film Division
-- Theatrical Distribution Division
-- Music Division
Our Feature Film Division intends to produce films independently as well as
through joint ventures with other production entities. The Music Division seeks
out talented artists and then produces and distributes recordings for these
artists. The Theatrical Distribution Division intends to be engaged in the
foreign and domestic distribution of films into traditional theater settings as
well as non-theatrical exhibition, such as hotels, airlines and ships.
Our Strategy
We propose to simultaneously develop our various divisions in accordance with
our available financial resources, the business opportunities presented to us
and the prevailing trends in the entertainment industry. By diversifying our
areas of concentration within the entertainment industry, we feel that we will
maximize our chances for profitable operations. Additionally, we seek to combine
the efforts and resources of one or more of our divisions for the successful
completion, distribution and advertising of any one of our productions. Some
specific strategies which we plan to implement are:
-- The continuous production of recordings;
-- The production of films;
-- The distribution of films in foreign and domestic markets through
various independent and joint venture distribution efforts;
-- The proposed development of Stapleton Studios and Recreation Center in
Staten Island, New York through a new majority owned corporate
subsidiary to be formed;
-- The retention of additional highly qualified and experienced
executives to operate our various divisions;
<PAGE>
Our Offices
Our executive office is located at 100A Gary Way, Ronkonkoma, New York 11779;
our telephone number is (631) 738-1010. Our music division is located at Prelude
Music, 304 Park Avenue South, 11th floor, New York, New York 10010. Our feature
film division will be located in Los Angeles, California. Our theatrical
distribution division will be located in Staten Island, New York.
Corporate Background
We began business in 1997 under the name Prelude Development, Inc., which
was formed as a Delaware corporation. Our name was changed to Big Dog
Entertainment, Inc. in July, 1999 and changed to Harbour Entertainment Inc. in
June, 2000. We presently operate through three basic divisions; our Feature
Films Division, Theatrical Distribution Division, and Music Division. We have no
corporate subsidiaries and we currently do not own any controlling interests in
any other business entities.
THE OFFERING
Common stock
offered by us. . . Up to 1,715,000 shares
Common stock to
be outstanding
after this
offering . . . . . 6,275,400 shares, assuming the maximum shares are sold and
underwriters do not exercise their warrants
Use of Proceeds . . -- Operation and expansion of various divisions;
-- Production of films and music recordings;
-- Development of Stapleton Studios and Recreation Center;
and
-- Working capital and general corporate purposes
RiskFactors . . . . An investment in the securities we are offering involves a
high degree of risk. Prospective investors should carefully
review the section entitled "Risk Factors" as well as other
information provided in this prospectus.
Proposed Nasdaq
Small Cap Market
Symbol . . . . . . "BDEI"
Except as noted, all of the information in this prospectus assumes that the
warrants that we will issue to the representative of the underwriters are not
exercised.
<PAGE>
SUMMARY FINANCIAL DATA
You should read the following summary financial data together with the
section of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from Period from Period from
December 5, December 5, December 5,
1997 1997 1997
Eight Months Eight Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
May 31, May 31, May 31, September 30, September 30, September 30,
Statements of Operations Data: 2000 1999 2000 1999 1998 1999
------------ ------------ ---------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Music sales $ 19,410 $ 20,750 $ 20,750 $ 20,750
---------- ---------- ---------- ----------
Operating Costs:
Cost of record sales 10,127 11,141 11,141 11,141
Write off of record masters
and related inventory $ 138,138 138,138
General and
Administrative 73,505 53,409 243,283 78,215 $ 91,563 169,778
Noncash compensation expense 125,000 125,000 125,000
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 211,643 63,536 517,562 89,356 216,563 305,919
---------- ---------- ---------- ---------- ---------- ----------
Loss from operations (211,643) (44,126) (496,812) (68,606) (216,563) (285,169)
Interest expense to shareholder 7,018 6,119 21,009 9,605 4,386 13,991
---------- ---------- ---------- ---------- ---------- ----------
Net loss $ (218,661) $ (50,245) $ (517,821) $ (78,211) $ (220,949) $ (299,160)
========== ========== ========== ========== ========== ==========
Net loss per share - basic
and diluted $(.05) ($.01) $(.02) $(.05)
===== ==== ===== =====
Weighted average number of
shares outstanding - basic
and diluted 4,463,534 4,229,738 4,274,776 4,107,460
========== ========== ========= =========
September 30, May 31
1999 2000
------------- --------
(unaudited)
Balance Sheet Data:
Cash $ 56,904 $ 114,311
Working capital (deficiency) (18,363) (59,961)
Total assets 413,865 595,534
Total long-term debt 0 0
Total liabilities 145,581 225,911
Total stockholders' equity 268,284 369,623
</TABLE>
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors and other information in this
prospectus before investing in our common stock.
As An Early Stage Development Company, We Have a Limited Operating History Upon
Which You Can Base Your Investment Decision.
We began in business in 1997 and since then have had limited operations. For
the period from December 5, 1997 (inception) through May 31, 2000, we sustained
losses of $518,000 on $21,000 in revenues. We are in an early stage of our
development. Consequently, we have a limited operating history upon which you
can evaluate our current business and future prospects. In making your
evaluation, you should consider the fact that, as a relatively new business in a
rapidly evolving industry, we may encounter many expenses, delays, problems and
difficulties which we do not currently have the experience to identify or
quantify.
Our Ability to Continue to Operate as a Going Concern is Uncertain
The independent auditors report on our financial statements contains
explanatory language that substantial doubt exists as to our ability to continue
as a going concern. The report states that we have net losses and negative cash
flows from operating activities since our inception. The financial statements
which accompany this Prospectus do not include any adjustments that might result
from our inability to operate as a going concern.
The Entertainment Industry Is Competitive, Speculative and Unpredictable
Successful Feature Film Production, Acquisition and Distribution Depends on Many
Factors Beyond our Control.
The production, acquisition, marketing and distribution of feature films is
a highly competitive and speculative business and has traditionally involved a
high degree of risk. Our film production, acquisition, marketing and
distribution activities will be subject to all such risks. In addition, our
business may be adversely affected by our limited financial and personnel
resources and our industry standing as a smaller, independent producer and
distributor.
The financial results of the marketing and distribution of a film are
unpredictable and depend on many factors, including many beyond the control of
the distributor. Consequently, the demand for a film may decline or cease to
exist after we have invested or made financial commitments to the acquisition
and marketing costs of that film.
The success of the film division depends on our ability to secure scripts
from third parties as well as rights to films which we can market and distribute
profitably. Notwithstanding our attempts to limit our risk with respect to each
script acquired, the revenues we derive from our films may not bear any relation
to the acquisition, marketing and distribution costs we incur.
<PAGE>
Our Ability to Recover Film and Record Production Costs is Uncertain
The production of films and records often requires us to incur large
up-front costs. There is no certainty that these costs will be recovered. If the
revenues generated by the films and records we produce are insufficient to
reimburse us for our up-front costs, our operations will be significantly
impaired. If public response to our productions is unfavorable, reimbursement of
up-front costs may be difficult or impossible. Our failure to be reimbursed for
these costs could jeopardize our ability to continue to operate as a going
concern.
Feature Films Attract More Viewers and Buyers Than Low Budget Films
Low budget films compete for audiences and buyers with many other feature
films, the great majority of which have been produced with substantially larger
budgets and which may contain well-known performers in their casts and better
photography, sound, music and other productions values.
Limited Name Recognition of Performers and Experience of Directors Effects
Commercial Potential of a Film
We believe that many of our proposed films may lack recognized performers,
whose presence could substantially increase the commercial potential of the
film. The absence of such performers may adversely affect our opportunities to
distribute a film. In addition, our films may be directed by persons who have
not previously directed a feature film. The involvement of a "first-time"
director may place the commercial viability of a film at risk.
Lack of Completion Insurance Increases Risk of Financial Loss
Our films may be produced without insurance to guarantee completion. Such
insurance is generally required to obtain the financing for the production of
feature films. The production budgets for these films may be insufficient to
provide for the contingency reserves required by an insurance company that
issues completion bonds and to pay the insurance premium. We may be exposed to
financial loss if the film is not completed.
Profitable Theatrical and Home Video Distribution Depends on Our Ability to Team
up With an Effective Distribution Network
We plan to distribute films and videos through distribution arrangements
with major film companies as well as arrangements with local distributors and
subdistributors. If we are unable to team up with an effective distribution
network, our ability to distribute a film may be materially affected.
The intense competition in the domestic and international film and home
video distribution markets combined with the upfront costs associated with film
and home video distribution present a risk that we may spend significant amounts
to market a film or home video which never gets distributed because of a lack of
commercial appeal or receives poor distribution due to any number of factors
which are beyond our control such as:
-- poor performance by a sub-distributor or co-distributor;
-- poor audience response;
<PAGE>
-- economic conditions in local markets; and
-- decreased demand for films from local wholesales and retailers.
The Success of The Music Division Depends on Many Factors Beyond our Control
We produce musical recordings for various artists and then seek to promote
and distribute such recordings. This Division of our business has many of the
same risks associated with our Film and Theatrical Distribution Divisions.
Our ability to secure talented artists which can generate salable recordings
is subject to many factors beyond our control, such as availability, timing and
trends in music. As with any product in the entertainment industry, the ultimate
financial success of the sale of the product depends on the public response to
such product. For this reason the success of any given product is highly
speculative and unpredictable.
Costs can become significant if we seek to distribute the product in a wide
range of markets. There are no assurances that the Company's operating budget
will be sufficient to finance new recording projects on an ongoing basis or to
complete recording projects that are in process.
Our Ability to Acquire an Equity Ownership Interest in Stapleton Studios is
Highly Uncertain
We have not yet formed a subsidiary to develop the Stapleton Studios project.
Although we are in preliminary negotiations to acquire the development rights to
the Stapleton Studios project, investors should not rely on these preliminary
negotiations as a basis for an investment in our common stock. There is no
certainty that we will be will be successful in negotiating a long-term lease
for the property with the City of New York. Additionally, even if we are
successful, we must still raise approximately $21 million to develop the
Stapleton Studios project.
We May Not be Able to Successfully Manage Our Business or Achieve Profitability.
We are managing a new business in the extremely unstable and competitive
entertainment industry. The Company doesn't have a successful operating history
upon which it can rely when attempting to acquire and develop new business
opportunities. Our management team is new and has not yet fully implemented its
management plan for our business. Additionally, we expect that our production
costs, sales and marketing, product development and administrative expenses will
increase in the future and, as a result, we will need to generate significant
revenues to achieve and maintain profitability. If revenues grow slower than we
anticipate, or operating expenses exceed our expectations or cannot be adjusted
accordingly, our business, results of operations, and financial condition will
be negatively impacted. To achieve and maintain profitability, we must, among
other things:
-- produce, promote and distribute films and music recordings;
-- respond quickly and effectively to competitive, market and
technological developments, as well as trends in the entertainment
industry;
-- expand distribution, sales and marketing operations;
-- broaden production capabilities;
-- retain and attract highly qualified officers and employees;
<PAGE>
-- design, complete and update our website on an ongoing basis; and
-- control expenses.
Potential Fluctuations in Our Quarterly Results Could Adversely Affect Our Stock
Price.
We expect that our quarterly operating results will fluctuate significantly
due to many factors, including:
-- demand for our productions;
-- market acceptance of our films;
-- market acceptance of our musical recordings;
-- effectiveness of domestic and foreign distribution networks;
-- competitive factors;
-- production time and costs of production;
-- technical difficulties with respect to the use of our website;
-- management of our growth; and
-- general economic conditions.
Additionally, if our operating results in one or more quarters do not meet
market expectations, the price of our common stock could be materially adversely
affected.
We May be Unable to Meet Our Future Capital Requirements.
Because our business is a capital intensive business, we may require
additional funding sooner than anticipated. We cannot be certain that additional
financing will be available on commercially reasonable terms, if at all. Based
on our current operating plan, we anticipate that the net proceeds of this
offering and cash provided by operations will allow us to meet our cash
requirements for at least the 12 months following the date of this prospectus.
If we raise additional capital through the sale of equity, including preferred
stock or convertible debt securities, the percentage ownership of our then
existing stockholders will be diluted.
Our Success Depends on The Efforts of, and Our Ability to Retain, Key Officers
and Management Personnel.
In addition to Marlowe R. Walker, our chief executive officer, we are
dependent upon several key senior management personnel, namely Nick Grillo,
president of the Company's Film Division, Robert DiMilia, president of the
Company's Theatrical Distribution Division and Don Welch, president of the
Company's Music Division. If we do not succeed in retaining or motivating our
current management or in hiring additional qualified employees, it will be
significantly more difficult to operate our business which will hurt our
financial condition and operations. Our success is dependent upon our ability to
retain our key management and to attract, assimilate and retain other highly
qualified employees.
Our Management Will Have Substantial Discretion Over the Use of Proceeds of This
Offering and May Not Apply Them Effectively.
Our management will have significant flexibility in applying the net
proceeds of this offering and may apply the proceeds in ways with which you do
not agree. The failure of our management to apply these funds effectively could
<PAGE>
materially harm our business. The proposed allocation of the net proceeds of
this offering represents our management's best estimate of the expected
utilization of funds to finance our activities in accordance with our
management's current objectives and market conditions.
You Will Incur Immediate And Substantial Dilution.
You will experience an immediate and substantial dilution of $5.29 per share
($5.75 if the minimum is sold) in the net tangible book value per share of
common stock from the initial public offering price, assuming an initial public
offering price of $7.00 per share, representing the mid point of the filing
range. You may also experience dilution if future stock options to purchase our
shares, or if the warrants to be issued to the underwriters, are exercised or
acquiring shares upon the exercise of outstanding options and warrants.
As of May 31, 2000, our Common Stock had a net tangible book value of $.03
per share. After the Offering, the net tangible book value per share will be
$1.71 if the maximum number of shares are sold and $1.25 if the minimum number
of shares are sold. This represents an immediate increase in net tangible book
value per share to existing shareholders who acquired their shares prior to the
Offering. Conversely, shareholders who acquired their shares during the Offering
will suffer an immediate dilution of their net tangible book value per share in
the amount of $5.75 if the minimum number of shares are sold and $5.29 if the
maximum number of shares are sold. Accordingly, existing shareholders will
benefit disproportionately when compared to shareholders who acquire their
shares during the Offering.
Unless a Public Market Develops for Our Securities, You May Not be Able to Sell
Your Shares.
Prior to this offering, there has been no public market for our common
stock. Although we have applied to list our shares of common stock on the Nasdaq
Small Cap Market, there can be no assurance that an active trading market may
not be developed or maintained. Failure to develop or maintain an active trading
market could negatively affect the price of our securities and decrease the
liquidity of our securities.
We do Not Plan to Pay Cash or Stock Dividends.
We have never paid any cash dividends on our stock and we anticipate that,
for the foreseeable future, we will continue to retain any earnings for use in
the operation of our business and do not intend to pay cash or stock dividends.
We have incurred net losses and negative cash flows from operations since our
inception. We anticipate that we will continue to experience losses during our
fiscal year 2000. All of the funds we receive from this Offering and our future
operations will be necessary to offset these losses and to maintain and develop
our existing business. Accordingly, there will be no available cash or stock for
the payment of dividends.
A Substantial Number of Our Shares Are Eligible for Future Sale.
The market price of our shares could drop as a result of sales of
substantial amounts of our shares in the public market following this offering
or the perception that such sales may occur. These factors could also make it
more difficult for us to raise funds through future offerings of stock.
<PAGE>
Our Stock Prices May Fluctuate, Which May Make it Difficult to Resell Your
Shares at Attractive Prices.
The market price of our common stock may be highly volatile. The market
prices of securities of other production companies are highly volatile. Factors
that could cause volatility in our stock price include:
-- fluctuations in our quarterly operating results;
-- changes in the market valuations of other production companies and
stock market price and volume fluctuations generally;
-- economic conditions specific to the production and entertainment
industry; and
-- additions or departures of our key personnel.
Our Executive Officers, Directors and Major Stockholders Will Control 60% of Our
Common Stock After This Offering: Management Interests May Differ and Conflict
With Yours.
After this offering, executive officers, directors and holders of 5% or more
of the outstanding common stock will, in the aggregate, beneficially own
approximately 60% of our outstanding common stock (67% if the minimum number of
shares are sold). These stockholders would be able to significantly influence
all matters requiring approval by our stockholders, including the election of
directors and the approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying, deterring or
preventing a change in control of the Company and may make some transactions
more difficult or impossible to complete without the support of these
stockholders.
It May Be Difficult For a Third Party to Acquire Our Company, and This Could
Depress Our Stock Price.
Delaware corporate law and our certificate of incorporation and bylaws
contain provisions that could delay, defer or prevent a change in control of our
company or our management. These provisions could also discourage proxy contests
and make it more difficult for you and other stockholders to elect directors and
take other corporate actions. As a result, these provisions could limit the
price that investors are willing to pay in the future for shares of our common
stock. These provisions:
-- authorize the issuance of "blank check" preferred stock, which is
preferred stock that can be created and issued by our board of
directors without prior stockholder approval, with rights senior to
those of common stock;
-- provide for the staggered election of directors, so that no more than
two directors could be replaced each year and it would take three
successive annual meetings to replace all directors;
-- prohibit stockholder action by written consent; and
-- establish advance notice requirements for submitting nominations for
election to our board of directors and for proposing matters that can
be acted upon by stockholders at a meeting.
You Should Not Rely on Forward-looking Statements in this Prospectus.
This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not historical facts, but
rather relate to future events or our future financial performance and are based
on our current expectations, estimates and projections about our industry, our
<PAGE>
beliefs and assumptions. Words including "may," "could," "would," "will,"
"anticipates," "expects," "intends," "plans," "projects," "believes," "seeks,"
"estimates" and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and other factors, some of which are
beyond our control, are difficult to predict and could cause actual results to
differ materially from those expressed or forecasted in the forward-looking
statements. These risks and uncertainties are described in "Risk Factors" and
elsewhere in this prospectus. We caution you not to place undue reliance on
these forward-looking statements, which reflect our management's view only as of
the date of this prospectus. We are not obligated to update these statements or
publicly release the result of any revisions to them to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events, unless such update or revision would be necessary to avoid
making such forward-looking statements misleading in light of the circumstances
under which they were made.
We May Not Be Able To Protect Our Proprietary Rights and May Infringe On The
Proprietary Rights Of Others.
Our efforts to establish and protect our proprietary rights may be
inadequate to prevent misappropriation or infringement of our proprietary
property. If we are unable to safeguard our intellectual property rights, our
business, operating results and financial condition could be materially harmed.
We regard our scripts, rights to films, copyrights and other intangible and
similar intellectual property as important to our success. We cannot represent
that third parties will not bring claims of copyright or trademark infringement
against us or claim that our use of scripts, compositions, films or treatments
violates a copyright. Further, there could be claims that we have
misappropriated their creative ideas or otherwise infringed on their proprietary
rights in connection with the films, music recordings or website we have or will
create. We are not aware of any claims. Any claims of infringement, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using certain films, scripts or
recordings, any of which could damage our business and financial condition.
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the minimum number of shares offered,
after deducting underwriting discounts and commissions and other expenses of
this offering (estimated to total approximately $425,000) will be approximately
$6,775,000. The net proceeds from the sale of the maximum number of shares
offered, after deducting underwriting discounts and commissions and other
expenses of this offering if the maximum number of shares is sold will be
approximately $10,375,000.
<TABLE>
<CAPTION>
Minimum Maximum Minimum Maximum
Net Net Percent of Percent of
Proceeds Proceeds Total Total
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Production and Distribution
of Recordings . . . . . . . . . . . . . . $500,000 $1,000,000 7.38% 9.64%
Creation of Distribution Division . . . . . 500,000 500,000 7.38% 4.82%
Investment in Newly Formed Subsidiary
to Develop Stapleton Studios Project. . . 3,000,000 3,000,000 44.28% 28.92%
Expansion of Film Division. . . . . . . . . 1,250,000 3,000,000 18.45% 28.92%
Working Capital and
General Corporate Purposes . . . . . . . 1,525,000 2,875,000 22.51% 27.70%
Total . . . . . . . . . . . . . . . . . . . 6,775,000 10,375,000 100.00% 100.00%
</TABLE>
Production and Distribution of Recordings - We intend to produce and
distribute two singles and three albums by new artists as well as artists that
are currently signed to our Music Division.
Creation of Distribution Division - We intend to acquire films for
distribution through our Theatrical Distribution Division.
Investment in newly formed subsidiary to develop the Stapleton Studios
Project - We are currently in negotiations with the City of New York to enter
into a long-term lease for the City's Homeport Property, a 36 acre property
located in Staten Island, which we intend to use for a production facility with
several sound stages. If negotiations with New York City are unsuccessful, the
proceeds allocated to the Stapleton project will be reallocated to our Film
Division.
Expansion of Film Division - We intend to expand our film division by
acquiring additional film rights to scripts and to produce independent films.
Working capital and general corporate purposes. Working capital may be
used, among other things, to pay salaries and wages, professional fees, rent and
other operating expenses.
We anticipate that the net proceeds from this offering and cash provided by
operations will be sufficient to fund our operations and cash requirements for
at least the 12 months following the date of this prospectus. We cannot assure
you, however, that such funds will not be expended earlier due to unanticipated
changes in economic conditions or other circumstances that we cannot foresee. In
the event our plans or assumptions change or prove to be inaccurate, we might
seek additional financing sooner than currently anticipated.
<PAGE>
The proposed allocation of the net proceeds represents our management's
best estimate of and the current intentions concerning the expected use of funds
to finance our activities in accordance with our management's current objectives
and market conditions. Our management and Board of Directors may allocate the
funds in significantly different proportions, depending on their needs at the
time. Pending application of the net proceeds in the manner mentioned above, we
intend to invest the net proceeds in short- term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash or stock dividends on our capital
stock. We presently intend to reinvest earnings to fund the development and
expansion of our business and, therefore, do not anticipate paying cash
dividends on our common stock in the foreseeable future. The declaration of
dividends will be at the discretion of our board of directors and will depend
upon our earnings, capital requirements and financial position, general economic
conditions and other pertinent factors.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May 31,
2000 and as adjusted to give effect to the sale of both the minimum number of
shares (1,143,000) and the maximum number of shares (1,715,000) offered hereby.
The following table should be read in conjunction with the financial statements
of the Company and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
May 31, 2000
----------------------------------------------
As Adjusted As Adjusted
Actual Minimum Maximum
------ ----------- -----------
<S> <C> <C> <C>
Accrued expenses $ 73,312 $ 73,312 $ 73,312
Interest payable to stockholder 21,009 21,009 21,009
Demand loan payable to stockholder 131,590 131,590 131,590
-------- ---------- ----------
$225,911 $ 225,911 $ 225,911
======== ========== ==========
Preferred stock-$.001 par value;
1,000,000 shares authorized; none
issued and outstanding
Common stock-$.001 par value;
25,000,000 shares authorized;
4,560,400 shares issued and
outstanding; 5,703,400 and
6,275,400 shares issued and
outstanding, as adjusted 4,560 5,703 6,275
Additional paid-in capital 882,884 7,656,741 11,256,169
Deficit accumulated during development
stage (517,821) (517,821) (517,821)
-------- ---------- ----------
Total stockholders' equity 369,623 7,144,623 10,744,623
-------- ---------- ----------
Total capitalization $369,623 $7,144,623 $10,744,623
======== ========== ===========
</TABLE>
<PAGE>
DILUTION
As of May 31, 2000, the Company had a positive net tangible book value
(total tangible assets less total liabilities), of $134,446 or approximately
$.03 per share of common stock. After giving effect to the completion of this
Offering, the proforma net tangible book value of the Company at May 31, 2000
would be $10,744,623, or approximately $1.71 per share if the maximum number of
shares is sold and $7,144,623, or approximately $1.25 per share if the minimum
number of shares is sold. This represents an immediate increase in net tangible
book value of approximately $1.22 to existing stockholders if the minimum number
of shares are sold and approximately $1.68 if the maximum number of shares are
sold and an immediate dilution in net tangible book value of $5.75 per share to
purchasers of shares in this Offering if the minimum number of shares is sold
and $5.29 per share if the maximum number of shares is sold. Dilution per share
represents the difference between the amount per share of common stock paid by
purchasers in this Offering and the proforma net tangible book value per share
of common stock immediately after completion of this Offering.
The following table illustrates the net tangible book value per share
dilution if the minimum of 1,143,000 or the maximum of 1,715,000 shares are
sold.
<TABLE>
<CAPTION>
Per Share
---------
Minimum Maximum
------- -------
<S> <C> <C>
Assumed Public Offering Price $7.00 $7.00
Net Tangible Book Value at May 31, 2000 .03 .03
Increase per share attributable to new
investors 1.22 1.68
Proforma net tangible book value per share
after Offering 1.25 1.71
Dilution per share to new investors 5.75 5.29
</TABLE>
<PAGE>
PLAN OF OPERATION
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to the financial statements and the other financial
information contained elsewhere in this prospectus.
Overview
We are a development stage company that was incorporated in Delaware in
December 1997 as Prelude Development, Inc. In July 1999, we changed our name to
Big Dog Entertainment, Inc and in June, 2000 changed our name to Harbour
Entertainment Inc. Since inception, we have generated only minimal revenues
principally from the sale and distribution of records and tapes by Prelude
Music, our music division. Through December 31, 1999, we have invested
approximately $250,000 in the acquisition and development of film rights and in
the production of music recordings. We are hopeful that we will be able to
acquire the development rights in a major real estate project located in Staten
Island, New York that will include sound stages for movie, TV and record
production and more than 50,000 square feet that can be utilized for office and
commercial space, all situated directly on New York Harbor with a panoramic view
of lower Manhattan. While we believe that all of the key ingredients are now in
place to enable us to implement our strategy, we have yet to realize any
significant revenues from operations.
During the twelve months following the completion of our offering, we are
optimistic that we can pursue our goals substantially in accordance with the
plan of operation outlined below.
Plan of Operation
We intend to allocate the proceeds of our offering with extreme care in
order to provide sufficient capital to enable each division to realize its full
potential.
Feature Films
Specifically, we intend to utilize up to $3,000,000, if all 1,715,000 of
our shares are sold, toward the acquisition of movie scripts and the production,
or more likely, the co-production of one or more feature films. We will not
commit in excess of $2,000,000 of our funds towards any one film property. As we
discuss in detail in "Business - Feature Film Division", there are many ways to
participate in the movie business and realize a favorable return without major
financial risk. We intend to maximize our participation while minimizing our
financial exposure by seeking to joint venture, co-produce or seek others to
fund the bulk of the costs involved in script acquisition, film production and
distribution. We currently have the rights to four movie projects which we
intend to develop. We also have the exclusive rights to a body of works created
by Warren Murphy, an award winning mystery writer. Our governing principal in
the feature film division, will be to limit our financial commitment to any one
project. Within that framework, however, we will attempt to involve the Company
in several quality situations.
<PAGE>
Agreement with Warren Murphy
On February 4, 1999, through our Feature Film Division, we entered into a
Body of Work Agreement (the "Murphy Agreement") with Warren Murphy ("Murphy"),
an award-winning author. The Murphy Agreement provides us with an option and
right of first refusal to purchase one or more of his novels, short stories,
screenplays and proposals (collectively, "Works") set forth as an exhibit to the
Murphy Agreement for the purpose of the production of a full length motion
picture or television series based on one of the Works. The Murphy Agreement has
a three year term commencing February 4, 1999. Any Work which is chosen for
purchase and production by us must initially have Murphy as the sole writer for
its screenplay. The Murphy Agreement also requires Murphy to provide us with an
outline and film treatment of any Work we choose to purchase within sixty days
of our request to produce one of his Works. Our right of first refusal on the
Works provides that if a Work is produced by any entity other than us, we must
be compensated and credited as Executive Producer. As compensation for entering
into the Murphy Agreement, Murphy received (i) a one-time payment of $60,000.00;
(ii) an agreement to pay him an agreed upon amount for the outright purchase of
any of the optioned Works; and (iii) an agreement to pay him five percent of the
gross profits earned by us on each of the optioned Works.
To date, we have optioned one of the Works, entitled "Swashbuckler." In
connection with optioning this Work, we have entered into an Option Purchase
Agreement, dated February 18, 1999 and a Writer Employment Agreement, dated
January 28, 1999, each with Murphy. Pursuant to these agreements, we have an
option to produce Murphy's screen play entitled "Swashbuckler," for which Murphy
will serve as the screenplay writer. Murphy has been paid $5,000.00 as an
initial payment to be applied against the $150,000.00 purchase price for the
rights to this screenplay payable if the screenplay is sold. The purchase price
for the rights to this screenplay is payable in three installments of $15,000.00
prior to the commencement of the production of this Work at which time Murphy
will be paid the $105,000.00 balance of the purchase price. Murphy is also
entitled to 5% of the gross profits earned by us in connection with the
production of Swashbuckler, as well as additional payments and royalties in the
event the Work becomes the basis for a television motion picture or mini-series
or a theatrical sequel or remake.
Music Division
We intend to allocate $1,000,000 from the proceeds of our public offering
toward the production, promotion and distribution of music recordings.
<PAGE>
Theatrical Distribution Division
We intend to use approximately $500,000 of the proceeds from our offering
to fund this division. Initially, we will undertake the distribution of two low
budget, independent films that we believe are of high quality and of interest to
a specific market segment. We will seek a financial arrangement where we will
receive a healthy portion (up to 50%) of the gross revenue of the film, for our
services. Our responsibility in this type of arrangement will be to place the
film in from 100 to 150 locations. Our obligation for prints, advertising and
promotional costs will be limited by the very nature of the film and its
distribution and these costs will be apportioned between us and the producers.
There are other types of distribution arrangements that are more high
profile but also involve greater financial exposure. We intend to grow slowly in
this area with particular concern to limiting any substantial outlays for prints
and ads. Should the appropriate situation arise, we may also consider the
distribution or joint distribution of one of our own films.
The Stapleton Project
Through the efforts, connections and extensive preliminary work of one of
our directors, we may have an opportunity to acquire the development rights to a
proposed entertainment and real estate project located in Staten Island, NY. We
intend to allocate approximately $3 million of the proceeds from this offering,
to fund a new majority owned subsidiary. We have been negotiating with the City
of New York to secure either a long term lease or similar rights that would
enable us to develop approximately 36 acres in the Stapleton area of Staten
Island. This parcel is located directly on New York Bay opposite downtown
Manhattan, and commands magnificent views of the Wall Street area and New York
Harbor. The Stapleton site contains several large buildings as well as
undeveloped land and a pier extending into the bay. Our plan is to develop this
area into a mega entertainment center containing extensive film and TV
production facilities, a recording studio and a host of related facilities such
as food courts, restaurants, health club, corporate offices, a multiplex
theatre, a hotel, a marina and public access to the pier and harbor.
Our plans are contingent on the negotiation of a favourable lease
arrangement with the City of New York. The City of New York is currently
considering our proposal. Consistent with our policy of caution and minimizing
our financial risk, we will commit no funds on speculation.
In the event that we are unsuccessful in negotiations with the City of New
York, we will continue to seek other suitable locations at which to develop a
production facility. Our failure to develop the Stapleton Studios project will
not alter our existing business plan. We will continue to seek out suitable film
treatments and musical talent for production of feature films and musical
recordings.
Results of Operations
From our Company's inception, we have realized only minimal revenues,
$20,750, all of which was derived from record sales. We have sustained losses
from inception to May 31, 2000 of ($517,821).
During the eight months ended May 31, 2000, the Company wrote off the
carrying value of record masters and related inventory $118,849 and $19,289,
respectively. Recovery of record master costs is dependent on, among other
factors, obtaining sufficient financing for promotion and distribution of the
related recordings. The Company's inability to obtain sufficient financing for
promotion and distribution and the resulting delay in releasing or expanding the
release of the recordings into the marketplace, has had an adverse impact on
future sales, and, in managements opinion, will result in future gross revenues
which will not be sufficient to recover the carrying value of the unamortized
record production costs and related inventory.
At May 31, 2000, we had a cumulative available federal net operating loss
carryforwards to reduce future taxable income of approximately ($380,000). This
net operating loss carryforwards expires in 2018, 2019 and 2020. There can be no
assurance that we will realize the benefit of the net operating loss
carryforwards. We have established a valuation allowance with respect to these
federal and state net operating loss carryforwards.
<PAGE>
Future results of operations will be largely dependent upon the total
amount of proceeds we realize from our offering and the level of success that we
achieve in our operating divisions.
Liquidity and Capital Resources
We have derived substantially all of our funding from the sale of our
common stock and loans from our officers and stockholders. Through May 31, 2000,
we sold our common stock at $1.25 and at $2.50 per share to suitable investors
and have realized a total of $762,000 to date. Loans totalling $131,590 were
made to us which bear interest at 8% per annum.
As of May 31, 2000, we had an accumulated deficit during our development
stage (inception - May 31, 2000 ($517,821).
Our independent auditor's report on our financial statements contain
explanatory language that substantial doubt exists about our ability to continue
as a going concern. The report specifies that we have experienced net losses and
negative cash flows from operating activities and anticipates that such
conditions will continue in fiscal year 2000. Our continued existence is
dependent on our ability to obtain additional equity and/or debt financing.
<PAGE>
BUSINESS
Overview
We are a development stage entertainment company engaged in film and music
production and distribution.
By operating through three distinct divisions, we have developed a diverse,
strategic approach to become competitive in the entertainment industry. Our
current divisions are:
-- Feature Film Division
-- Theatrical Distribution Division
-- Music Division
Our Feature Film Division intends to produce films independently as well as
through joint ventures with other production entities. The Music Division seeks
out talented artists and then produces and distributes recordings for these
artists. The Theatrical Distribution Division intends to be engaged in the
foreign and domestic distribution of films into traditional theater settings as
well as non-theatrical exhibition, such as hotels, airlines and ships. We do not
have any subsidiaries and we do not own any significant or controlling equity
interests in any other business entities.
Our Strategy
We propose to simultaneously develop our various divisions in accordance with
our available financial resources, the business opportunities presented to us
and the prevailing trends in the entertainment industry. By diversifying our
areas of concentration within the entertainment industry, we feel that we will
have maximized our chances for profitable operations. Additionally, we believe
that we will be able to combine the efforts and resources of one or more of our
divisions for the successful completion, distribution and advertising of any one
of our productions. Some specific strategies which we plan to implement are:
-- The continuous production of recordings;
-- The production of films;
-- The distribution of films in foreign and domestic markets through
various independent and joint venture distribution efforts;
-- The proposed development of Stapleton Studios and Recreation Center in
Staten Island, New York through a new majority owned corporate
subsidiary to be formed;
-- The retention of additional highly qualified and experienced
executives to operate our various divisions;
<PAGE>
Feature Film Division
The Film Industry
Historically, the largest companies, or the so-called Hollywood Majors, have
dominated the feature film industry by producing and distributing a majority of
those feature films which generate significant theatrical box office receipts in
the United States. Although independents - smaller film production and
distribution companies - have played a significant role in the production and
distribution of feature films, much of the financing, production, marketing and
distribution of feature films remains in the control of the majors, and a number
of large production and distribution companies that have substantial financial
resources from other activities.
The majors include MCA Universal Pictures, Warner Bros. Pictures, Twentieth
Century Fox Film Corporation, Paramount Pictures Corporation, Sony Pictures
Entertainment, the Walt Disney Company and certain other companies considered to
be majors because of their substantial financial resources and production
activities. Generally, the majors own their own production studios, sound stages
and post- production facilities, have a United States or worldwide distribution
organization, release films with production costs generally ranging from $15
million to $40 million or more, provide a continual source of films to theaters
in the United States and internationally and expend sums frequently in excess of
$10 million for advertising, promotion and other marketing costs in connection
with the distribution of each film.
In addition, some of the majors own companies which are described as
independent, but are not because of their access to the resources of one of the
majors. These companies include, among others, Miramax Films (owned by the Walt
Disney Company), Sony Classics (owned by Sony Pictures) and New Line Cinema
(owned by Turner Broadcasting System, Inc.)
The independent production companies typically do not own production studios
and have insubstantial financial, personnel and other resources in comparison to
the majors and the companies owned by or otherwise affiliated with one of the
majors. The independent production companies are typically involved with
lower-budget films and are highly dependent on and continually involved in
developing sources of financing for their film production activities.
The production of a feature film involves four basic phases: development,
pre-production, principal photography and post-production. During development, a
writer may be engaged to write an original screenplay or a screenplay based on a
literary work, or film production rights to an existing screenplay may be
acquired. Certain creative personnel may be hired or contacted to determine
their availability. In pre- production, a budget is prepared, certain personnel,
including a director, actors, and various technical personnel are hired,
shooting schedules and locations are planned and other steps necessary to
prepare the film for principal photography are completed. Principal photography,
the actual filming or "shooting" of the film generally continues for a period of
not more than three months. In post-production, the film is edited and
synchronized with music, sound effects and dialogue and, in certain cases,
special effects are added. The final edited synchronized film negative is used
to manufacture release prints suitable for theatrical exhibition. Certain
aspects of post-production may be computer assisted and may be reproduced
digitally and on videotape.
<PAGE>
The majors generally have sufficient cash flow from their film distribution
and related activities, or, in some cases, from unrelated businesses (e.g.,
theme parks, publishing, electronics, licensing and merchandising) to provide
for production costs, and frequently own and maintain on a full-time basis
technical production staff and office, camera, sound, lighting and other
equipment, studios, sets, props, wardrobe and other physical facilities. The
majors often enter into long-term contracts with writers, producers and other
creative personnel for the development of numerous projects.
Independent production companies generally hire creative and other production
personnel, retain the other elements required for pre-production, principal
photography and post-production activities and arrange for production financing
on a project-by-project basis. Independents generally must complete the
production financing of a feature film prior to commencement of principal
photography while attempting to maintain and provide for the scheduled
commitments of the director and principal performers whose involvement are
frequently conditions of obtaining production financing.
Both Majors and independent production and distribution companies generally
incur various third- party participation obligations in connection with the
distribution and production of a feature film. These participations are
contractual rights of actors, directors, screenwriters, investors and others
entitling them to share in revenues or profits from a particular film. Except
for the most sought-after talent, participations are generally payable from film
revenues only after all fees and costs of distribution, marketing, production
and financing are recouped.
Business Strategy for the Feature Film Division
The central business strategy for the Feature Film Division is to secure the
film rights to books or scripts which lend themselves to action or adventure
films. The public acceptance and approval for these types of films is
unquestionable, as can be seen from the tremendous box office success which many
of these types of films generate.
Currently, we believe that there is a trend in the film industry for larger
studios to utilize smaller productions companies for creative input and script
development, while the larger studios dedicate their expansive resources to
talent acquisition, facilities, financing, marketing and distribution. This
joint venture strategy allows for the overall production to attain major motion
picture status while paying close attention to the script selection and creative
process.
The films which we intend to produce are smaller, low-budget films, which
typically cost approximately $2 million to produce. Generally, the directors,
actors, creative personnel and all other production personnel working for union
or scale wages receive a participation interest in the net profits on the film.
This method of production simultaneously minimizes expenses and fosters greater
creativity from the participants, as all those who are connected to the project
have a vested interest in the outcome.
Another often-used production method is for us to work together with a film
financing company or companies that would provide substantially all of the
funding requirements. We would retain artistic control over the production,
receive a reduced up front production fee and share in a larger than normal
backend participation. However, we would not become entitled to any back-end
fees unless and until the funding sources have recouped all of their negative
costs. This production method virtually eliminates our financial risk and could
afford a handsome backend if the production is successful. The "Puppet Man," a
full length feature film with a budget of 6.8 million dollars will be
co-produced by Harbour and Spider-Vision, Inc. in this fashion.
<PAGE>
In addition to "The Puppet Man" we are working on two other feature films,
"One of Us" which we are co-producing with Rehme Productions and which we intend
to commence filming later this year, and "Going Postal," for which we are
currently securing financing and which also is intended to commence filming
later this year.
We also intend to seek out other production companies which are interested in
acquiring an idea, novel or script which is currently owned by us or to which we
have the rights. In this case, we would receive an up-front payment for the sale
of the script as well as a percentage of the profits of the film. This is a very
attractive business alternative for us in light of our recent acquisition of the
exclusive rights to a body of work created by Warren Murphy, an award winning
author who has won many awards, including the Best Book award from the Mystery
Writers of America. His movie scripts and credits include "The Eiger Sanction"
and the "Lethal Weapon" movies. We have acquired the exclusive rights to 33 of
his novels, nine short stories and 3 existing scripts through mid-2002,
including the Trace, series of comic mysteries, Jericho Day, the international
bestseller, "Grandmaster", the "Digger" series of mysteries and the award
winning "The Ceiling of Hell." We intend to sell the rights to produce several
of these works to other production companies in return for a fee as well as a
participation in profits generated by the film.
We currently have 4 films in development. In addition to our rights to Warren
Murphy's substantial body of work, we either own outright or have the rights to
12 scripts. In all of our film production efforts, we intend to
-- Allocate a set amount of financial resources and adhere strictly to
this investment so as to avoid the problems that so often arise in
this industry from going "over-budget;"
-- Carefully evaluate the quality of the script;
-- Evaluate the domestic and foreign distribution potential for the
finished production;
-- Minimize and carefully monitor production costs; and
-- Attempt to share or pass along as much of the risk as possible in the
event that the film does not meet box office projections.
Nick Grillo will serve as the President of our Feature Film Division. Mr.
Grillo has worked in film production, financing, distribution and direction for
more than thirty years. Mr. Grillo's expertise in the film industry will help to
ensure that our Feature Film Division continues to grow and achieve its business
goals. A description of Mr. Grillo's background is set forth in the "Management
- Key Employees" section of this prospectus.
Theatrical Distribution Division
The financial success of a film is greatly dependent on the distribution
mechanism which is in place for that film. By establishing our own theatrical
distribution division, we intend to generate profits while simultaneously
providing a distribution network for our own film productions.
<PAGE>
The primary focus of the Theatrical Distribution Division is to place films
in foreign and domestic theaters as well as in non-theatrical settings, such as
hotels, airlines, ships, military bases and hospitals. The Theatrical
Distribution Division also seeks to place films into home video production and
distribution, pay- per-view screenings, cable and network television broadcasts,
satellite broadcasts as well as on the Internet. Additionally, other revenues
from licensing, sales, laser discs and merchandising are also part of our
Theatrical Distribution Division. Our Theatrical Distribution Division also
oversees and collects distribution revenues.
Theatrical Distribution - Theatrical distribution results in the exhibition
of feature films to the general public in movie theaters for a fee. The
essential components of theatrical distribution are
-- Manufacturing prints of the film for mass distribution;
-- Licensing the film to the exhibitors; and
-- Promoting the film through advertisements and publicity.
The financial success of "box office gross" for a film is directly related to
the success of the promotional efforts for the film. The competition to
distribute movies during the summer is intense as this is the peak exhibition
season. Our ability to exhibit films in popular theaters during the peak
exhibition season will significantly effect the revenues for the Theatrical
Distribution Division and will also effect our ability to distribute a film in
an international market.
Home Video - This aspect of our distribution business involves the sale of
films recorded on video cassettes and video discs to local and national video
retailers as well as specialty stores, convenience stores and record stores.
These entities then rent or sell the videos to consumers for private viewing.
Home video generally closely follows theatrical distribution so that the video
sales will benefit from the advertising and promotion for the film. We will
attempt to secure distribution arrangements with wholesale distribution
companies which will deal directly with the stores which sell to the general
public. We may also use catalogues, direct mail and telemarketing to stimulate
interest in our videos from the viewing public and various retail concerns.
Pay-Per-View. Pay-per view television allows cable television subscribers
to purchase feature films, sporting events and music concerts, on a "per use"
basis. The fees paid by viewers are typically shared among the program
distributor, the pay-per-view operator and the cable operator.
Cable Televison. The cable television industry has channels such as
HBO/Cinemax, Showtime/The Movie Channel which sell movies to cable system
operators for a monthly license fee based on the number of viewers receiving the
service. These services are in turn offered by cable system operators to viewers
for a monthly subscription fee. The pay television networks generally acquire
their film programming by purchasing the distribution rights from feature film
distributors. Distributors also license feature films for "basic" cable service
which includes certain programming as part of the basic fee to the viewer.
Broadcast Television. Broadcast television or "free television", involves
showing films through national networks ABC, CBS, and Fox or independent
televison stations. Syndication is the process of distributing films and other
programming directly to independent television stations as opposed to the large
networks. Distributors of feature films generally make films available for
licensing through syndication after the completion of all possible licenses for
cable television.
<PAGE>
Non-Theatrical Markets. The right to exhibit films may also be licensed to
hotels, airlines, ships-at- sea, military installations, schools, libraries and
other film users generally referred to as part of the "non- theatrical" market.
Many independent film distribution companies sublicense the right to distribute
films to the "non-theatrical" market to a company in the "non-theatrical"
distribution business which in turn distributes the films to the potential
users.
International Markets. International distribution rights for feature films
may be licensed to a single distributor, or may be licensed on a
country-by-country basis. In the latter instance, the film is typically licensed
to a subdistributor or sublicensee for a limited period of years for a
negotiated percentage of the revenues received by such subdistributor or
sublicensee or may also be on a "flat" license fee basis in which case the
subdistributor in the foreign country has no responsibility to account with
respect to the revenues of the film. Generally, foreign subdistributors or
sublicensees acquire rights in their country for theatrical, home video and pay
and free television use.
Robert DiMilia will serve as President of the theatrical distribution
division. Mr. DiMilia has worked in the motion picture and film distribution
business for over thirty years. A portion of the extensive roster of films for
which Mr. DiMilia has overseen distribution is set forth in Mr. DiMilia's
biography in the "Directors-Executive Officers" section of this prospectus.
Film distribution typically involves
-- securing agreements to distribute a film in theatrical or
non-theatrical settings;
-- the distribution of prints or copies of the film to the various
exhibitors; and
-- collection of our share of the box office receipts from the exhibitor
when our method of payment is a percentage of box office receipts.
We will be operating through three basic methods of distribution:
-- We work on a fee-basis as a producer's representative and in this role
secure a contract with a major film company which has a vast
distribution network in place which will be utilized to distribute the
film we are representing. This method requires a substantial capital
outlay by the Company for advertising and promotional expense, but
also generates revenues most quickly due to the extensive number of
locations in which the film is shown;
-- We work on a fee-basis as a producer's representative and secure
contracts with various local or regional distributors and
sub-distributors, in which case the film opens in one or two selected
regions around the country and gradually moves into other areas. This
method results in a lower expenditure of advertising and promotional
expense by the Company but also necessitates a longer period of time
before the film generates meaningful cash flow;
-- We undertake distribution ourselves and place a film in 100 to 150
selected theaters in return for approximately 35% to 50% of the gross
film revenue. This method is most often used for small "art" films.
This method is the most profitable for the Company if the film is
successful because of our profit sharing arrangement and also because
we spend very little in the way of advertising and promotional costs.
<PAGE>
Our promotional and marketing efforts with respect to films which we
distribute include print, radio and television advertisements as well as
interviews on local radio and television stations for producers, directors or
actors who are involved in the film. We will carefully analyze and budget all
amounts spent by us for marketing and promotion in an effort to make sure that
these costs will be recouped by us or are otherwise included in our fee.
We intend to expand our distribution operations to include additional films
from outside production companies as well as in-house films produced by our
Feature Film Division.
Music Division
Prelude Music is a record label which seeks to produce, release and promote
R&B, Hip-Hop, Rock, Latin, Blues, Jazz, Latin and Dance music. Using only
minimal financial resources, Prelude, in the last two years has:
-- Released, on a limited basis in the New York metropolitan area only,
the single "Love is all Around" by Brenda Durmann ("Durmann"), a
Canadian singer, which reached #20 on the Billboard Dance Chart and
has radio play in United States, United Kingdom, Japan, Germany and
Canada; Released , on a limited basis in the New York metropolitan
area only, the single "Love is the Answer" featuring Pierre Salandy
and Barbara Tucker, both gold record artists. In January, 1998 Prelude
Music entered into a 5 year management agreement with Ms. Durmann
pursuant to which Prelude acts exclusively as Durmann's personal
manager in all areas of the entertainment industry. In return for
Preludes services, Durmann is required to pay Prelude 50% of her gross
earnings as an entertainer during the term of this agreement. She is
also required to pay Prelude 50% of her gross earnings during the two
year period subsequent to the termination of this agreement which
earnings arise out of agreements entered into, or music or other
artistic material created during, the initial term. Durmann has also
appointed Prelude as her attorney in fact to sign agreements and
conduct business as well to collect all monies paid to her. The
agreement with Prelude and Durmann shall automatically be extended for
the duration of any recording contract entered into by Durmann during
the term of this agreement. Durmann shall have the right to terminate
this agreement in the event that Prelude is unable to secure a
recording contract for her within nine months of the delivery to
Prelude of a recording demo by Durmann.
-- Signed two rap artists, Pudgey and Pretty Black, to recording
contracts. Prelude's recording contract with George Graham (a/k/a
"Pretty Black") provides that Graham is required to create and deliver
to Prelude master recordings for production and distribution by
Prelude. The term shall continue until the later of (i) 12 months;
(ii) 18 months after the delivery of the last recording required to be
delivered by Graham under this agreement; or (iii) upon the signing of
a distribution agreement by Prelude for the distribution of all
records made by
<PAGE>
Graham for Prelude, in which case the term of this agreement shall be
co-terminus with the term of the distribution agreement. Graham has
given Prelude the option to extend this agreement for 5 successive
contract periods. Graham is required to deliver one master recording
of a song during the initial contract period and a full length master
recording during each optional contract period. Prelude will pay
Graham 9% and 12%, respectively, of all royalties it receives in
connection with the sales of singles and albums. Prelude must account
to Graham for all royalty payments it receives. Upon completion and
delivery to Prelude, the master recordings shall be the sole property
of Prelude. Prelude and Graham will share equally all revenue and
royalties derived from the use of artwork on any of Graham's
recordings as well as miscellaneous merchandise income resulting from
Graham's recordings and performances. Prelude is entitled to receive a
50% interest in all publishing income for such recordings.
-- Entered into an agreement with the A&R Entertainment, Inc. ("A&R") for
a live recording of various performances at the Uptown Comedy Club,
located in New York City. The agreement with A&R provides that Prelude
will receive one master recording and has options to receive four
additional recordings. Pursuant to this agreement, all creative
decisions concerning the recorded music will be made jointly. Prelude
shall collect all royalties payable in connection with these
recordings and shall pay A&R 18% to 18 1/2% of royalties collected,
the exact percentage to be determined by the number of units sold.
Sales outside of the United States are subject to a different royalty
payment scale. Prelude and A&R will share publishing royalties.
Prelude will retain all of the publishing administration income.
-- Signed the Latino singing group "PokoLoco" to a recording contract
which will yield a full- length release under the Prelude Latina label
in the upcoming year. The recording contract with PokoLoco ("Poko")
requires Poko to create and deliver to Prelude master recordings for
production and distribution by Prelude. The term shall continue until
the later of (i) 12 months; (ii) 18 months after the delivery of the
last recording required to be delivered by Poko under this agreement;
or (iii) upon the signing of a distribution agreement by Prelude for
the distribution of all records made by Poko for Prelude, in which
case the term of this agreement shall be co-terminus with the term of
the distribution agreement. Poko has given Prelude the option to
extend this agreement for 4 successive contract periods. Poko is
required to deliver one full length master recording during the
initial contract period and a full length master recording during each
optional contract period. Prelude is required to pay 12% of all
royalties received in connection with the sales of albums. Prelude
must account to Poko for all royalty payments it receives. Upon
completion and delivery to Prelude, the master recordings shall be the
sole property of Prelude. Prelude and Poko will share equally all
revenue and royalties derived from the use of artwork on any of Poko's
recordings as well as miscellaneous merchandise income resulting from
Poko's recordings and performances. Prelude is entitled to receive a
50% interest in all publishing income for such recordings.
<PAGE>
-- Entered into a comprehensive distribution agreement with Sumthing
Distribution, a division of NRP, Inc. which designates Sumthing
Distribution as the exclusive U.S. distributor for Prelude's record
releases for a two year term. Sumthing has the option to extend the
term for an additional year provided that it has completed at least
$400,000.00 in record sales. As compensation for its services,
Sumthing is entitled to retain 23% of the net sales proceeds received
in connection with the sale of Prelude's records as well as a handling
charge equal to $.20 per record. Sumthing is also authorized to
withhold 30% of gross sales proceeds from Prelude as a reserve for
returned product. Sumthing is required to account to Prelude on a
monthly basis. In addition to selling Prelude's records, Sumthing also
invoices and collects from customers, administers advertising, and
accepts and stores records from Prelude. Prelude determines retail
list price for its records and Sumthing determines the selling price
of the records to its customers.
The development of Prelude to date is due in great part to the leadership
of Don Welch, its President. Mr. Welch has extensive experience in the music
industry as a reporter for Billboard magazine, a disc jockey, as well as an
extensive career in record promotions which has earned him several gold records.
A more detailed description of Mr. Welch's background is set forth in the
"Management - Key Employees" section of this prospectus. To date, the Music
Division has generated $20,100 in revenue, all of which is from limited
distribution of two singles by Brenda Durmann and Underground Network.
The Internet
We are in the process of creating a website for the Company which will
feature a wide variety of relevant and topical information including
-- Local and regional movie listings
-- Concert information and schedules
-- Various entertainment listings for other events
-- Entertainment related news items and gossip
-- Trailers for local plays and movies
-- Release dates for new films and recordings
-- Advertising; and
-- Merchandise Sales
We have entered into an agreement with Networq.Com. Under this agreement,
Networq will establish our Internet site and design the various pages that
comprise the site. Networq will also provide hosting services to the Company,
which will enable Internet users to access our website.
Presence on the Internet is important for any entertainment company. In
addition to using the website as a non-commerce, business to business
informational tool, we will also advertise our film and record releases as well
as the film and record releases for other smaller production companies.
<PAGE>
Stapleton Studios and Recreational Center
There has been a resurgence of business from the film and television
industry in New York City. Factors attributable to this response include, a
favorable union environment, sufficient capable technical and creative
personnel, a stable environment (no earthquakes), a picturesque city and
urban-scapes and more. A renewed popularity in feature film and television
production in the New York area have led to a need for additional stage and
studio space in the New York area.
Stapleton Studios and Recreational Center is a 36 acre property located in
the Stapleton section of Staten Island, a borough located directly across the
New York Bay from downtown Manhattan. The site can be reached by a ten minute
ferry ride from downtown Manhattan. This site, originally developed by the U.S.
Navy at a cost of over $800 million, commands majestic views of Manhattan, the
Statue of Liberty, and the Verrazano Bridge. The property contains seven
buildings ranging in size to up to 234,000 square feet, as well as several acres
of undeveloped land and a pier which extends into the New York Bay.
Proposed Plan for Development
Mr. DiMilia, the President of our Theatrical Distribution Division, is
currently in the process of attempting to secure a ground lease from the City of
New York or a similar document whereby the land and buildings on the site are
designated for the construction and operation of Stapleton Studios and
Recreational Center. The City has reacted favorably to Mr. DiMilia's proposal
and negotiations are ongoing. The estimated cost for the re-development of
Stapleton Studios is $21 million.
Mr. DiMilia's business experience is set forth in the "Directors and
Executive Officers" section of this prospectus.
Competition
The film and music segments of the entertainment business are highly
competitive, speculative and unpredictable. We face competition from major film
and record companies as well as smaller, independent distribution and production
companies and record labels. Many of these companies have far greater marketing,
technical, distribution and financial resources than we do, as well as proven
operating histories and long-standing relationships in the film and music
industry. Some of the smaller companies which compete with us are owned by
larger companies and therefore have access to a greater field of resources.
The process of producing and distributing films and musical recordings is
costly and may be adversely effected by our limited financial and personnel
resources and limited industry standing. Additionally, we will be competing with
the producers of films and music who are able to attract well-known performers
and attain higher production value because of larger budgets which are available
to them.
Regulation
Our rights to feature films and musical recordings are granted legal
protection under the copyright laws of the United States and most foreign
countries, which provide substantial civil and criminal sanctions for
unauthorized duplication and exhibition of feature films and musical recordings.
We plan to take appropriate measures ourself or through licenses to secure and
maintain copyright protection for all films and musical recordings under the
laws of all applicable jurisdictions.
<PAGE>
The Code and Rating Administration of the Motion Picture Association of
America, an industry trade association, assigns ratings for age-group
suitability for viewing of feature films. The Federal Communications Commission
may require that certain musical recordings contain an advisory that such
recording contains offensive language.
In addition, United States television stations and networks as well as
foreign governments impose additional restrictions on the content of feature
films which may restrict in whole or in part exhibition on television or in a
particular territory. These restrictions on the content of our films and musical
recordings may limit our ability to distribute our films and musical recordings.
Insurance
We believe that our insurance coverage for our business is generally in
accordance with industry standards and is adequate in light of our business and
the risks to which we are subject. We intend to obtain Directors and Officers
liability insurance prior to or upon completion of this offering.
Employees
As of May 31, 2000, we had two full-time employees. Upon completion of this
offering, we intend to have approximately 16 employees on a full time basis. Our
future success will depend in part, upon our ability to attract, retain and
motivate qualified personnel. We are a non-union facility. None of our employees
are covered by a collective bargaining agreement and our management considers
relations with our employees to be good. We regularly enter into subcontracts
with free-lance personnel as production technicians from union guilds. When
using freelance personnel, it is our practice to use payroll services which are
recognized as the employer of record.
Facilities
Our principal executive offices are located in Ronkonkoma, New York, where
we lease approximately 500 square feet of space, on a month-to-month basis, at a
current monthly rental of $550. We also lease 144 square feet of space for our
Music Division, in New York, New York at a current monthly rental of $901. This
is a month-to-month tenancy.
Legal Proceedings
We are not involved in any pending, or to our knowledge, threatened legal
proceedings. We may from time to time become a party to various legal
proceedings arising in the ordinary course of business.
<PAGE>
MANAGEMENT
Directors And Executive Officers
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Marlowe R. Walker 63 President, Chief Executive Officer, Secretary,
Treasurer, Director
Robert S. Rosen 55 Chief Financial Officer
Robert E. DiMilia 52 Director
Thomas B. Foley 51 Director
David G. Tricamo 34 Director
Christopher Grega 41 Director
</TABLE>
Marlowe R. Walker has been the Company's Chief Operating Officer, Treasurer
and a Director since inception. Mr. Walker began his business career with
Republic Aviation as an electronic systems analyst and supervisor. Thereafter,
he spent 29 years with Grumman Aerospace Corporation where among other projects,
Mr. Walker, as both an engineer and a manager, worked on the Apollo Lunar Module
and the F-14 Tom Cat ("Top Gun" Aircraft) programs. At Grumman, he was
responsible for fund management in excess of $50 million.
Robert S. Rosen has been the Company's Chief Financial Officer since July
1999. He has more than 25 years of experience in both law and accounting. He is
a licensed CPA and attorney in the State of New York. His experience includes
tax planning, purchase and sale of business, purchase and sale of real estate,
tax shelters and financial and estate planning. He has a BS. from NYU in
accounting, and MBA from NYU in accounting and taxation and a JD from Brooklyn
Law School. His work experience includes working for S. D. Leidesdorf and
Company and Seidman & Seidman. Currently he maintains law and accounting
practices in Westchester, New York.
Robert E. DiMilia, has been consultant to Harbour since January, 1998 and a
director since January 2000. In January, 2000, Mr. DiMilia was also appointed
President of our Theatrical Distribution Division. Mr. DiMilia has been involved
in all aspects of the motion picture industry for more than thirty years. Since
February 1982, Mr. DiMilia has served as Vice President for Producer's Marketing
Group, Ltd whose clients include the British Broadcasting Company, ABC, CBS,
Eastman Kodak. Mizlou Sports Network, Casablanca Film Works and a host of
independent feature films and film.
From June 1991 to November 1998, Mr. DiMilia was Vice President for Sales
and Marketing for Films Around the World and fostered the distribution of
feature films for such premiere film directors as Martin Scorcese, Sam Raimi,
John Sayles, Maggie Greenwald and others. Among the films Mr. DiMilia acquired
for Harbour were several Sundance Film Festival winners including Chameleon
Street, The Bronx War, and The Kiss-Off.
Thomas B. Foley, 51, has been a Director of the Company since 1998. He is a
professional executive with a background and extensive expertise in the areas of
international security matters. He is a graduate of the New York State Military
Academy and has served as an Officer in the U.S. Marine Corps, where he has held
both active and reserve duties within the US and abroad as a Company and Field
Grade Officer. He retired in 1998, attaining the rank of Major. Currently, he is
<PAGE>
employed by the Department of Defense in the Human Resources Division and is
responsible for the interviewing and hiring of key government employees for
sensitive positions throughout the world.
Mr. Foley is a 1972 graduate of the John Jay College of Criminal Justice.
He holds an Associate of Arts Degree and a Bachelor of Science Degree in
Criminal Justice. Prior to his employment with the Department of Defense, Mr.
Foley served with the New York City Police Department in various capacities
including an investigator in the Organized Crime Bureau.
David G. Tricamo, 34 has been a Director of the Company since 1998. He is
currently a detective in the Suffolk County NY Police Department, where he has
been employed for the past 12 years. In addition, Mr. Tricamo is an Adjunct
Professor at New York Institute of Technology where he teaches Forensics and
Criminal Technology. He also founded a successful martial arts school in 1992
which in 1995, he sold to his partner. Mr. Tricamo holds a Bachelor of Arts
Degree in Psychology from Stony Brook University and a Masters in Criminal
Justice, with a concentration in Public Administration from Long Island
University - Summa Cum Laude. Mr. Tricamo has received several awards and
distinctions including "Cop of the Year" and "Top Police Recruit."
Christopher Grega, 41, has been the Secretary and a Director of the Company
since its inception. Mr. Grega has more than 16 years of experience in financial
management and analysis, accounting, program development and business planning.
He holds a Bachelor of Science degree in accounting and business administration
from Bloomsbury University. Mr. Grega will devote only a small portion of his
time to the affairs of the Company.
Key Employees
In addition to our Directors and Executive Officers, we will employ the
following key employees.
Don Welch has been the President of the Company's Music Division since
March 1998. As President of the Company's Music Division, he has succeeded, with
minimal funds, to attract quality artists and begin to position the Company as
an up and coming label. Mr. Welch was a reporter for "Billboard" magazine for
seven years where he worked closely with many of the major and independent
record companies and reviewed music for new additions to the Billboard dance
chart. Mr Welch was also a top disc jockey in New York. He was also instrumental
in the conception, building and designing of "Elite", which for 12 years was one
of New York City's most successful nightclubs.
Mr. Welch founded the "Underground Network", an international dance music
promotion company that hosted a weekly music event where representatives from
major and most independent record companies came to showcase their new artists.
Mr. Welch operated the "Underground Network" for more than 5 years and was
responsible for a staff of 25 people. He has worked closely with many of the top
record and radio promoters. Mr. Welch attended the institute of Audio Research
in New York City. Mr. Welch has received gold and platinum awards for record
promotion for Michael Jackson - Epic Records, Janet Jackson - A&M Records, C&C
Music Factory, Columbia Records, De La Soul, Tommy Boy Records, Crystal Waters,
Mercury/Polygram Records, EPMD, Sleeping Bag Records, Lisa Stansfield, Arista
Records and Snap, Arista Records.
<PAGE>
Nick Grillo has more than 30 years experience in the entertainment
industry. Mr. Grillo will serve as President of the Company's film division upon
completion of this Offering. He is presently a senior executive at the newly
formed Rehme Productions, with responsibility for all production and
development.
In September, 1997, Mr. Grillo held the position of Executive Vice
President of Neufeld/Rehme Productions and served as a development executive
involved with such top action successes as "Patriot Games" and "Clear and
Present Danger". In 1993, he served as Neufeld/Rehme's ("NR") production
executive on "Lightning Force", a 22 episode series for Viacom. In addition to
his development duties, Mr. Grillo was NR's producer for all of its television
and cable productions. His credits include "Gridlock" starring David Hasselhoff
and Kathy Ireland, an MOW which NBC aired. "For the Future: The Irvine Fertility
Scandal", starring Mary Lou Henner which aired on Lifetime and "A Woman Undone",
a Showtime Network Premiere starring Mary McDonnell, Randy Quaid and Sam
Elliott. Mr. Grillo recently produced 2 Showtime Premiere movies "Escape: Human
Cargo", starring Treat Williams and Stephen Lang and "Blond Faith", starring
Courtney Vance and Charles Dutton. The film was invited to screen at the 1998
Sundance Film Festival prior to its telecast in February, 1998. Prior to his
association with NR, Mr. Grillo partnered with Alan Riche as the US distributor
of 2 rock and roll films, "Yessongs" from the British group "YES" and the
"London Rock and Roll Show", hosted by Mick Jaggar. The concert film was shot at
Wembley Stadium They also produced AIP's cult classic "Youngblood" and for ABC
television and L.A. Jazz, a series of half- hour programs shot at the legendary
Lighthouse Cafe in Hermosa Beach, CA. Mr. Grillo began his career in the
entertainment industry as an accountant in the well known firm of Julius
Lefkowitz & Company. His client roster included many top musicians, among them
the "Beach Boys", who later recruited Grillo as their business/personal manager.
After almost 7 years with the "Beach Boys", Mr. Grillo moved into the arena of
independent film and television production.
<PAGE>
Board Composition
At each annual meeting of our stockholders, all of our directors will be
elected to serve from the time of election and qualification until the next
annual meeting following election. In addition, our bylaws provide that the
authorized number of directors, which is a minimum of three and a maximum of
seven, may be changed only by resolution of the board of directors.
We have also granted to the representative of the underwriters the right,
for a period of three years from the closing of this Offering, to nominate a
designee of the representative for election to our board of directors. The
representative has not yet exercised its right to designate this person. If the
representative elects not to exercise this right, then the representative may
designate one person to attend meetings of our board of directors.
Each officer is elected by, and serves at the discretion of, our board of
directors. Each of our officers and directors, other than non-employee
directors, devotes his full time to our affairs. Our non-employee directors
devote such time to our affairs as is necessary to discharge their duties. There
are no family relationships among any of our directors, officers or key
employees.
Directors' Compensation
Directors who are also our employees receive no additional compensation for
attendance at board meetings. Non-employee directors will receive $500 for
attendance at each board meeting or any committee of the board that they attend
and will be reimbursed for their travel, lodging and other out-of-pocket
expenses in connection with their attendance at board and committee meetings. No
directors' fees have been paid to date. We anticipate that our Board of
Directors will hold regularly scheduled meetings quarterly.
Executive Compensation
From December 7, 1997 (inception) through May 31, 2000, there was no cash
compensation paid to any of our officers or directors.
Option Grants
No options have ever been granted to any of our directors, officers,
employees or consultants.
Employment Agreements
No employment agreements have been entered into by the Company and any of
its officers or employees. Upon completion of this Offering, we will be entering
into three year employment agreements with each of Marlowe Walker, Robert Rosen,
Nick Grillo, Don Welch and Robert DiMilia. The employment agreement for each of
these individuals shall set forth the position to be held by each individual as
well as a detailed description of the general and specific duties for such
individual. The annual compensation for each individual shall range from
$75,000.00 to $150,000. Additionally, incentive payments will be paid at the
discretion of the Company based on the performance of the respective Division in
which each individual is employed. Each employee will be given two weeks
vacation and shall be permitted to participate in any available pension, profit
sharing or health insurance plan initiated by Harbour. Each employee will be
granted stock options for the purchase of shares of our Common Stock upon
consummation of the Offering. Each agreement contains a provision prohibiting
the employee from working for, or owning an interest in, any business which
competes with Harbour. The non-compete provision exists during the term of this
agreement and extends for the six month period following the employee's
voluntary departure. We may terminate this agreement for cause. The employee may
terminate this agreement at any time upon 30 days written notice.
<PAGE>
LIMITATION ON LIABILITY OF AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Overview. Under our Certificate of Incorporation and Delaware law, our
directors are not liable for monetary damages for breach of fiduciary duties
except in special situations as described below. In addition, under our
Certificate of Incorporation, we are required to indemnify our directors and
officers against all losses to the fullest extent permitted by Delaware law.
Finally, under Delaware law, we are entitled to obtain insurance on behalf of
our directors and officers to protect them against liabilities that may occur in
their official capacities.
Limitations on Liability of Directors. Under Section 145 of the Delaware
General Corporation Law, a corporation may indemnify a director, officer,
employee or agent of the corporation (or a person who 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 the person 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. In the
case of an action brought by or in the right of a corporation, the corporation
may indemnify a director, officer, employee or agent of the corporation (or a
person who 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 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, except that no indemnification may 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 a court finds that, in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
Indemnification for Directors and Officers. Under Delaware law, a
corporation may indemnify its present and former directors and officers for a
variety of court or administrative proceedings. We have adopted a provision
which requires us to indemnify and hold harmless any person involved in any
action, suit or proceeding because that person is or was a director or officer
of ours. This provision does not, however, require us to indemnify an officer or
director in a proceeding they initiate without the authorization of our
directors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of ours
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, indemnification for
liabilities is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
<PAGE>
Insurance for Directors and Officers. Under Delaware law, a corporation may
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. We have adopted a provision which permits
us to maintain insurance to protect us and our directors and officers against
expenses, liabilities and losses whether or not we would have the power to
indemnify these persons under Delaware law. We intend to have in place at or
promptly after the closing of this offering a directors' and officers' liability
and company reimbursement liability insurance policy.
STOCK OPTION PLAN
In June 2000, the Company's Board of Directors authorized the 2000 Stock
Option Plan (the "2000 Plan") for officers, directors, employees and consultants
of the Company, for which the Company has reserved an aggregate of 1,500,000
shares of common stock. The 2000 Plan provides that it will be administered by
the Board of Directors or a committee of the Board of Directors of the Company
and that the committee will have authority to determine the identity of the
recipients of the options and the number of shares subject to each option.
Options granted under the 2000 Plan will be non-qualified stock options. The
option price shall be 100% of the fair market value of the common stock on the
date of the grant. The term of any option may be fixed by the committee but in
no event shall exceed ten years from the date of grant. Options are exercisable
upon payment in full of the exercise price, either in cash or in common stock
valued at fair market value on the date of exercise of the option. The term for
which options may be granted under the 2000 Plan expires May 31, 2010.
CERTAIN TRANSACTIONS
During fiscal 1998, the Company purchased the rights to eleven motion
picture projects from a company controlled by a then founding shareholder, Mark
Koch (the "Seller"), for an aggregate purchase price of $60,000 in cash.
Subsequently, due to uncertainties relating to the Seller's ownership rights,
both parties canceled the agreement. During fiscal 1999, $30,000 of the purchase
price was repaid. In January 2000, the Seller executed an unsecured promissory
note in the amount of $30,000 bearing interest at the rate of 8%, which is
payable on September 30, 2000.
During fiscal 1998, the Company advanced $50,000 to a company controlled by
a then founding shareholder, Mark Koch, $30,000 of which was repaid in fiscal
1999. In January 2000, the advance was converted to an unsecured promissory note
in the principal amount of $20,000 bearing interest at 8% per annum, payable on
September 30, 2000.
During fiscal 1998 and 1999, respectively, Marlowe R. Walker made working
capital cash advances to the Company of $87,590 and $44,000, which are due on
demand with interest computed at the rate of 8% per annum.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock, as of the date of this prospectus. The
information in this table provides the ownership information for:
-- each person known by us to be the beneficial owner of more than 5% of
our common stock;
-- each of our directors and director nominees;
-- each of our executive officers; and
-- our executive officers, directors and director nominees as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the Securities and Exchange Commission and includes voting or
investment power with respect to the shares. Unless otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
the number of shares indicated as beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage ownership
for each person listed below includes shares of common stock underlying options
or warrants held by the person that are exercisable within 60 days of the date
of this prospectus, but excludes shares of common stock underlying options or
warrants held by any other person. Common stock beneficially owned and
percentage ownership are based on 4,560,400 shares outstanding before this
offering and 5,703,400 shares to be outstanding after the completion of this
offering if the minimum number of shares are sold and 6,275,400 shares to be
outstanding after the completion of this offering if the maximum number of
shares are sold.
Unless otherwise indicated, the address of each beneficial owner is c/o
Harbour Entertainment Inc., 100A Gary Way, Ronkonkoma, New York 11779.
<TABLE>
<CAPTION>
Percentage Of Common Stock
Beneficially Owned
-----------------------------------
Name, Address And Title Number Of Shares
of Beneficial Owner Beneficially Owned Before Offering After Offering
----------------------- ------------------ --------------- --------------
Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
Marlowe R. Walker, CEO . . . . 2,200,000 (1) 48.24% 38.57% 35.06%
Robert S. Rosen. . . . . . . . * - - -
Thomas B. Foley. . . . . . . . 966,000 (1)(2) 21.18% 16.94% 15.39%
Christopher A. Grega. . . . . 200,000 (1) 4.39% 3.51% 3.19%
David G. Tricamo . . . . . . . 257,600 (1)(3) 5.65% 4.52% 4.10%
All executive officers,
directors and director
nominees as a group
(5 persons). . . . . . . . . . 3,623,600 79.46% 63.54% 57.74%
<FN>
---------------------------------------------------------------------------------------------
* Represents beneficial ownership of less than 1% of common stock.
(1) These are restricted securities within the meaning of Rule 144 of the
General Rules and Regulations of the Securities Act of 1933, as amended.
(2) Includes 860,000 shares of common stock owned by Thomas Foley and Mary Ann
Foley, as joint tenants, 66,000 of which shares are not subject to the
restrictions of Rule 144.
(3) Includes 57,600 shares of common stock which are not subject to the
restrictions of Rule 144, and does not include 12,000 shares of common
stock owned by Robert Tricamo, Mr. Tricamo's brother, as to which Mr.
Tricamo disclaims beneficial ownership.
</FN>
</TABLE>
<PAGE>
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 25,000,000 shares of common stock,
par value $.001 per share and 1,000,000 shares of Serial Preferred Stock, par
value $.001 per share. Upon completion of this Offering, there will be 6,275,400
shares of our common stock issued and outstanding and up 171,500 common stock
Purchase Warrants which will be issued to the representative of the underwriters
in connection with this Offering.
The description of our securities are summaries and do not contain all the
information that may be important to you. For more complete information, you
should read our Certificate of Incorporation and its amendments which are all
filed as exhibits to the registration statement of which this prospectus forms a
part.
Common Stock
Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of our common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any shares of preferred stock outstanding at the time, holders of our common
stock are entitled to receive dividends ratably, if any, as may be declared from
time to time by our board of directors out of funds legally available therefore.
Upon the liquidation, dissolution or winding up of us, the holders of our common
stock are entitled to receive ratably, our net assets available after the
payment of all liabilities and liquidation preferences on any outstanding
preferred stock. Holders of our common stock have no preemptive, subscription,
redemption or conversion rights, and there are no redemption or sinking fund
provisions applicable to the common stock. The outstanding shares of our common
stock are, and the shares offered by us in this offering will be, when issued
and paid for, validly issued, duly authorized, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue in the future.
Outstanding Warrants
We have agreed to issue to the representative of the underwriters, for a
total of $171,500, warrants to purchase an aggregate of up to 200,000 shares of
common stock exercisable for a period of four years commencing one year after
the effective date of the registration statement of which this prospectus is a
part, at a price equal to 110% of the initial public offering price of the
shares of common stock. The representative's warrants contain anti-dilution
provisions providing for automatic adjustments of the exercise price and number
of shares issuable on exercise price and number of shares issuable on exercise
of the representative's warrants upon the occurrence of some events, including
stock dividends, stock splits, mergers, acquisitions and recapitalisation. The
representative's warrants contain demand and piggyback registration rights
relating to the shares of common stock issuable thereunder. For the life of the
representative's warrants, the representative will have the opportunity to
profit from a rise in the market price for the shares of common stock. The
holders of the representative's warrants will have no voting, dividend or other
stockholder rights with respect to those warrants. The holders of shares of
common stock issued upon exercise of those warrants will have the voting,
dividend, and other stockholder rights of holders of shares of common stock. The
representative's warrants are restricted from sale, transfer, assignment or
hypothecation for the one year period from the date of this prospectus, except
to officers or partners of the underwriters and members of the selling group
and/or their officers or partners.
<PAGE>
Registration Rights
During a three year period commencing 36 months after December 15, 1997, a
majority of the holders of _______ shares of common stock issued in connection
with our December, 1997 private placement will be entitled to demand that we
file a registration statement with respect to the registration of such shares
under the Securities Act if we are subject to the reporting requirements of the
Exchange Act of 1934.
Such holders are also entitled to "piggy-back" registration rights in
connection with any registration by us of our securities for our own account or
for the account of other security holders. In the event that we propose to
register any shares of common stock under the Securities Act, the holders are
entitled to receive notice and are entitled to include their shares in the
registration statement. The placement agent's warrants and the representative's
warrants also have demand and piggyback registration rights.
Transfer Agent and Registrar
We have appointed Jersey Transfer & Trust Company, 201 Bloomfield Avenue,
Verona, New Jersey 07044 as transfer agent for our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our
securities and there can be no assurance that a significant public market for
any of our securities will be developed or sustained after this offering. Sales
of substantial amounts of our common stock in the public market after this
offering, or the possibility of those sales occurring, could adversely affect
prevailing market prices of our common stock or our future ability to raise
capital through an offering of equity securities. We are unable to predict the
number of shares of our common stock that will be sold after this offering,
whether in the public markets or under Rule 144 under the Securities Act or
otherwise, as this will depend on the market price of our securities, personal
circumstances of the seller, and other factors.
Upon completion of this offering, we will have outstanding _________ shares
of common stock. Of these ________ shares of common stock, _________ shares will
be freely tradeable without restriction under the Securities Act, except for any
shares purchased by an "affiliate" of ours, as that term is defined under the
rules and regulations of the Securities Act, which will be subject to the resale
limitations of Rule 144 under the Securities Act.
The remaining ________ shares are "restricted securities" as defined under
Rule 144. These restricted securities were issued and sold by us in private
transactions in reliance upon exemptions from registration under the Securities
Act. In general, under Rule 144, beginning 90 days after the completion of this
offering, a person, or persons whose shares are aggregated, who has beneficially
owned restricted securities for at least one year, including the holding period
of any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period a number of common shares that does not exceed the
greater of (1) one percent of the then outstanding common shares, approximately
______ shares following this offering, or (2) the average weekly trading volume
of our common stock during the four calendar weeks preceding that sale. Sales
under Rule 144 are also subject to certain manner of sale and notice
<PAGE>
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of ours
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 who is not an affiliate of ours, is entitled to sell
such common stock without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. Non-affiliates may resell
our securities issued under Rule 701 in reliance upon Rule 144 without having to
comply with Rule 144's public information, holding, volume, and notice
requirements.
Holders of an aggregate of _______ shares of our common stock have certain
piggyback registration rights with regard to the resale of these shares.
Following the completion of this offering, these holders could require us to
register for resale their shares, and the shares would then be freely tradeable,
subject to the lock- up agreements described below.
There are currently _____ shares of our common stock freely saleable in the
market place, but the holders of these shares have entered into agreements with
us prohibiting the sale of more than ten percent of their total shares within
the first three months after our common stock begins to trade publically, and
more than an additional ten percent of their remaining shares during the
following three-month period.
Each of our officers, directors, and all other holders of shares of our
common stock and securities exchangeable or convertible into shares of our
common stock, have agreed not to, directly or indirectly, offer, sell, transfer,
pledge, assign, hypothecate or otherwise encumber or dispose of any of our
securities, whether or not presently owned, for a period of ___ months after the
date of this prospectus without the prior written consent of us and the
representative.
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below
have, severally and not jointly, agreed through Russo Securities, Inc., as the
representative of the underwriters, to purchase from us, and we have agreed to
sell to the underwriters, the aggregate number of shares of our common stock set
forth opposite their respective names:
<TABLE>
<CAPTION>
Number of Shares
Underwriters of Common Stock
------------ ----------------
<S> <C>
Russo Securities, Inc. . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . .
</TABLE>
Terms of The Offering
The underwriting agreement provides that the underwriters will sell the
shares on a "best efforts" basis for up to a maximum of $12 million dollars and
for a minimum of $8 million dollars. The underwriting agreement also provides
that the obligations of the several underwriters under that agreement are
subject to several conditions precedent, including the absence of any material
adverse change in our business and the receipt of certain certificates, opinions
and letters from our counsel and our independent public accountants. The
underwriters are committed to take and to pay for all of the shares offered
hereby, if any are purchased. In the event of a default by any of the
underwriters, purchase commitments of the non-defaulting underwriters may be
increased or the underwriting agreement may be terminated.
The underwriters have advised us that they propose to offer all or part of
the shares of common stock offered hereby directly to the public initially at
the price set forth on the cover page of this prospectus. They have also advised
us that they may offer shares of common stock to certain dealers at a price that
represents a concession of not more than $. per share, and that the underwriters
may allow, and these dealers may reallow, a concession of not more than $. per
share to certain other dealers. After the commencement of this offering, the
price to the public and the concessions may be changed.
We have agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including certain liabilities under the Securities
Act, and to contribute to payments the underwriters and their controlling
persons may be required to make in respect thereof.
Compensation for The Underwriter
We have agreed to pay the representative of the underwriters a
non-accountable expense allowance equal to 3% of the gross proceeds of this
offering, of which none has been paid as of the date of this prospectus. We have
also agreed to pay all expenses in connection with qualifying the securities
under the laws of those states the representative may designate, including fees
and expenses of counsel retained for such purposes by the representative and the
costs and disbursements in connection with qualifying the offering with the
National Association of Securities Dealers, Inc.
<PAGE>
We have agreed to issue to the representative of the underwriters warrants
to purchase an aggregate of up to 171,500 shares of common stock exercisable for
a period of four years commencing one year after the effective date of the
registration statement of which this prospectus is a part, at a price equal to
110% of the initial public offering price of the shares of common stock. The
representative's warrants contain anti- dilution provisions providing for
automatic adjustments of the exercise price and number of shares issuable on
exercise price and number of shares issuable on exercise of the representative's
warrants upon the occurrence of some events, including stock dividends, stock
splits, mergers, acquisitions and recapitalisation. The representative's
warrants contain certain demand and piggyback registration rights relating to
the shares of common stock issuable thereunder. For the life of the
representative's warrants, the representative will have the opportunity to
profit from a rise in the market price for the shares of common stock. The
holders of the representative's warrants will have no voting, dividend or other
stockholder rights with respect to those warrants. The holders of shares of
common stock issued upon exercise of those warrants will have the voting,
dividend, and other stockholder rights of holders of shares of common stock. The
representative's warrants are restricted from sale, transfer, assignment or
hypothecation for the one year period from the date of this prospectus, except
to officers or partners of the underwriters and members of the selling group
and/or their officers or partners.
The representative of the underwriters has informed us that the underwriters
do not expect any sales of the shares of common stock offered by this prospectus
to be made to discretionary accounts controlled by the underwriters.
Determination of Offering Price
Prior to this offering, there has been no established market in the United
States or elsewhere for our securities. The public offering price will be
determined by us in consultation with the representative of the underwriters. It
is expected that the price determination will take several factors into account,
including our results of operations, our future prospects and the prevailing
market and economic conditions at the time of this offering. There can be no
assurance that an active trading market will develop for any of the securities
offered by this prospectus, or that any of such securities will trade in the
public market subsequent to this offering at or above the initial public
offering price, or at all.
The representative, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids. Over-allotment involves syndicate sales in excess of this offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the shares of common stock being offered so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the shares of common stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the representative to reclaim a selling
concession from a syndicate member when the shares of common stock originally
sold by the syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the shares of common stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq Small Cap Market or otherwise
and, if commenced, may be discontinued at any time. In addition, the
underwriters may engage in passive market making transactions in our securities
on the Nasdaq Small Cap Market in accordance with Rule 103 of Regulation M.
Neither we nor the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the securities offered by this prospectus.
<PAGE>
LEGAL MATTERS
The legality of the common stock offered by this prospectus will be passed
upon for us by Blau, Kramer, Wactlar & Lieberman, P.C., 100 Jericho Quadrangle,
Jericho, New York 11753, our legal counsel. Certain legal matters will be passed
upon for the underwriters by Gary A. Chernay, Atlanta, Georgia.
EXPERTS
Our financial statements as of September 30, 1999 and September 30, 1998 and
for the period December 5, 1997 through September 30, 1998, the year ended
September 30, 1999 and for the period December 5, 1997 through September 30,
1999 included in this prospectus and registration statement have been audited by
Richard A. Eisner & Company, LLP, independent certified public accountants, as
set forth in their report thereon which contains an explanatory paragraph with
respect to the substantial doubt about our ability to continue as a going
concern, as discussed in Note A to the financial statements appearing in the
registration statement. The financial statements have been included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at 7 World Trade Center, Suite 1300, New York, New York, 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661. The public
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. The Commission maintains a Website at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and we
intend to furnish our shareholders annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial statements for each of the first three
quarters of each year.
We will be applying for the listing of our common stock on the Nasdaq Small
Cap Market under the symbol "BDEI." After this offering is effective, you may
obtain certain information about us on Nasdaq's Internet site
(http://www.Nasdaq-Amex.com).
<PAGE>
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN
OFFER TO SELL ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND
IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
TABLE OF CONTENTS
PAGE
Prospectus Summary.. . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Capitalization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Dilution.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Business.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Limitation on Liability of and Indemnification of Directors and
Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certain Transactions.. . . . . . . . . . . . . . . . . . . . . . . . . 38
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 39
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . 40
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . . . 41
Underwriting.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
How to Get More Information. . . . . . . . . . . . . . . . . . . . . . 45
Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . . . F-1
UNTIL __________, DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
_________ SHARES
COMMON STOCK
PROSPECTUS
RUSSO SECURITIES, INC.
, 2000
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Contents
Page
----
Financial Statements
Independent auditors' report F-2
Balance sheets as of September 30, 1999 and 1998 and May 31, 2000
(unaudited) F-3
Statements of operations for the period December 5, 1997 (inception)
through September 30, 1998, the year ended September 30, 1999,
the period December 5, 1997 (inception) through September 30,
1999, the eight months ended May 31, 2000 and 1999 (unaudited)
and the period December 5, 1997 (inception) through May 31, 2000
(unaudited) F-4
Statements of changes in stockholders' equity for the period from
December 5, 1997 (inception) through September 30, 1999 and the
eight-month period ended May 31, 2000 (unaudited) F-5
Statements of cash flows for the period December 5, 1997 (inception)
through September 30, 1998, the year ended September 30, 1999,
the period December 5, 1997 (inception) through September 30,
1999, the eight months ended May 31, 2000 and 1999 (unaudited)
and the period December 5, 1997 (inception) through May 31, 2000
(unaudited) F-6
Notes to financial statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Harbour Entertainment Inc.
Ronkonkoma, New York
We have audited the accompanying balance sheets of Harbour Entertainment Inc.
(formerly Big Dog Entertainment Inc.) (a development stage company) as of
September 30, 1999 and 1998, and the related statements of operations, changes
in stockholders' equity and cash flows for the year ended September 30, 1999,
for the period from December 5, 1997 (inception) through September 30, 1998 and
for the period from December 5, 1997 (inception) through September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of Harbour Entertainment Inc. as of
September 30, 1999 and 1998, and the results of its operations and its cash
flows for the year ended September 30, 1999, for the period from December 5,
1997 (inception) through September 30, 1998 and for the period from December 5,
1997 (inception) through September 30, 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, since inception, the Company has experienced net losses
and negative cash flows from operating activities and anticipates that such
conditions will continue in fiscal year 2000. This raises substantial doubt
about the ability of the Company to continue as a going concern. Management's
plans in regard to these matters, are also described in Note A. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Richard A. Eisner & Company, LLP
New York, New York
December 17, 1999
With respect to Note E
January 3, 2000
With respect to Note F
February 16, 2000
With respect to Note K
June 1, 2000
With respect to Note B[9]
June 12, 2000
F-2
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
May 31, September 30,
2000 1999 1998
--------- -------------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash $114,311 $ 56,904 $ 15,528
Inventory 19,289 5,270
Other current assets 1,639 1,025
Amounts due from related parties 50,000 50,000 110,000
Film and record production costs, net 125,895 244,744 80,999
Property, equipment and software, net 40,192 11,614 1,954
Deferred offering costs 235,177 18,969
Other assets 28,320 11,320 2,720
-------- -------- --------
$595,534 $413,865 $216,471
======== ======== ========
LIABILITIES
Accrued expenses $ 73,312 $ 2,000
Interest payable to stockholder 21,009 $ 13,991 4,386
Demand loan payable to stockholder 131,590 131,590 87,590
-------- -------- --------
225,911 145,581 93,976
-------- -------- --------
Commitments (Note H)
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value; 1,000,000
shares authorized; none issued and
outstanding
Common stock - $.001 par value; 25,000,000
shares authorized; 4,560,400, 4,365,600
and 4,185,600 issued and outstanding,
respectively 4,560 4,366 4,186
Additional paid-in capital 882,884 563,078 347,258
Stock subscription receivable (8,000)
Deficit accumulated during development stage (517,821) (299,160) (220,949)
-------- -------- --------
369,623 268,284 122,495
-------- -------- --------
$595,534 $413,865 $216,471
======== ======== ========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-3
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Period From Period From Period From
December 5, December 5, December 5,
1997 1997 1997
Eight Months Eight Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
May 31, May 31, May 31, September 30, September 30, September 30,
2000 1999 2000 1999 1998 1999
------------ ----------- ---------- ------------ ------------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Music sales $ 19,410 $ 20,750 $ 20,750 $ 20,750
---------- ---------- ---------- ----------
Operating costs:
Cost of music sales 10,127 11,141 11,141 11,141
Write-off of record master costs and related
inventory $ 138,138 138,138
General and administrative 73,505 53,409 243,283 78,215 $ 91,563 169,778
Noncash compensation expense 125,000 125,000 125,000
----------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 211,643 63,536 517,562 89,356 216,563 305,919
----------- ---------- ---------- ---------- ---------- ----------
Loss from operations (211,643) (44,126) (496,812) (68,606) (216,563) (285,169)
Interest expense to stockholder 7,018 6,119 21,009 9,605 4,386 13,991
----------- ---------- ---------- ---------- ---------- ----------
Net loss $ (218,661) $ (50,245) $ (517,821) $ (78,211) $ (220,949) $ (299,160)
=========== ========== ========== ========== ========== ==========
Net loss per share - basic and diluted $(.05) $(.01) $(.02) $(.05)
===== ===== ===== =====
Weighted average number of shares outstanding -
basic and diluted 4,463,534 4,229,738 4,274,776 4,107,460
=========== ========== ========== ==========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-4
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Par Value Capital Receivable Deficit
------ --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Common stock issued to founders of
the Company on January 9, 1998
at par value 4,000,000 $4,000 $ (4,000)
Issuance of common stock from
January through August 1998 at
$1.25 per share, net of offering
costs of $5,556 185,600 186 226,258 $(8,000)
Shares returned from founding
stockholders and issued as
compensation on April 28, 1998
at $1.25 per share 125,000
Net loss for the period $(220,949)
--------- ------- -------- ------- ---------
Balance - September 30, 1998 4,185,600 4,186 347,258 (8,000) (220,949)
Issuance of common stock from
November 1998 through April 1999
at $1.25 per share, net of offering
costs of $9,000 180,000 180 215,820 8,000
Net loss for the year (78,211)
--------- ------- -------- ------- ---------
Balance - September 30, 1999 4,365,600 4,366 563,078 0 (299,160)
Issuance of common stock from
November 1999 through February
2000 at $1.25 per share 133,600 133 166,867
Issuance of common stock in
April 2000 at $2.50 per share 61,200 61 152,939
Net loss for the period (218,661)
--------- ------- -------- ------- ---------
Balance - May 31, 2000
(unaudited) 4,560,400 $ 4,560 $882,884 $ 0 $(517,821)
========= ======= ======== ======= =========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-5
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period From Period From Period From
December 5, December 5, December 5,
1997 1997 1997
Eight Months Eight Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
May 31, May 31, May 31, September 30, September 30, September 30,
2000 1999 2000 1999 1998 1999
------------ ----------- ---------- ------------ ------------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(218,661) $(50,245) $(517,821) $(78,211) $(220,949) $(299,160)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued as compensation 125,000 125,000 125,000
Depreciation 1,243 855 2,733 1,273 217 1,490
Amortization of record master 4,304 5,276 5,276 5,276
Write-off of record master costs and
related inventory 138,138 138,138
Changes in:
Inventory (2,524) (19,289) (14,019) (5,270) (19,289)
Other current assets (614) (1,639) (1,025) (1,025)
Other assets (17,000) (5,340) (28,320) (8,600) (2,720) (11,320)
Accrued expenses and interest payable
to stockholder 80,330 4,120 94,321 7,605 6,386 13,991
--------- -------- --------- -------- --------- ---------
Net cash used in operating
activities (16,564) (48,830) (201,601) (87,701) (97,336) (185,037)
--------- -------- --------- -------- --------- ---------
Cash flows from investing activities:
Film and record production costs (139,204) (250,020) (169,021) (80,999) (250,020)
Property, equipment and software (29,821) (10,282) (42,925) (10,933) (2,171) (13,104)
Amounts due from related parties (110,000) (110,000) (110,000)
Repayment of amounts due from related parties 60,000 60,000 60,000 60,000
--------- -------- --------- -------- --------- ---------
Net cash used in investing
activities (29,821) (89,486) (342,945) (119,954) (193,170) (313,124)
--------- -------- --------- -------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of stock 320,000 216,000 762,444 224,000 218,444 442,444
Deferred offering costs (216,208) (235,177) (18,969) (18,969)
Amounts due to related party 44,000 131,590 44,000 87,590 131,590
--------- -------- --------- -------- --------- ---------
Net cash provided by financing
activities 103,792 260,000 658,857 249,031 306,034 555,065
--------- -------- --------- -------- --------- ---------
Net increase in cash 57,407 121,684 114,311 41,376 15,528 56,904
Cash - beginning of period 56,904 15,528 15,528
--------- -------- --------- -------- --------- ---------
Cash - end of period $ 114,311 $137,212 $ 114,311 $ 56,904 $ 15,528 $ 56,904
========= ======== ========= ======== ========= =========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-6
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE A - THE COMPANY AND BASIS OF PREPARATION
Harbour Entertainment, Inc. (the "Company"), which changed its name in June 2000
from Big Dog Entertainment, Inc., is a Delaware corporation, which was
incorporated on December 5, 1997 under the name of Prelude Development, Inc. The
Company is in the development stage and is engaged in the businesses of creating
and developing scripts for the motion picture and television industries, film
production and distribution, and music production and distribution (see Note I).
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As reflected in the accompanying
financial statements, the Company has not generated any significant revenues,
has incurred net losses and negative cash flows from operating activities since
inception and management expects that such losses and negative operating cash
flows will continue in fiscal year 2000. This raises substantial doubt about the
Company's ability to continue as a going concern. The Company's continued
existence is dependent on its ability to obtain additional equity and/or debt
financing. The Company is attempting to raise additional equity financing
through a proposed public offering (see Note J). The financial statements do not
include any adjustments relating to the recoverability of recorded asset amounts
or the amount of liabilities that might be necessary as a result of this
uncertainty.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Revenue recognition:
Music is sold in transactions in which the buyer has the right to return the
discs, cassettes and vinyls. As the Company presently does not have historical
experience to reasonably estimate future returns, revenues from music sales are
recognized upon resale by the buyer.
Revenue from licensing film exhibition rights to movie theaters will be
recognized when the films are shown. Revenue from films licensed to television
will be recognized when the license period begins and certain specified
conditions have been met.
[2] Film and record production costs:
Film costs include the direct costs of acquiring and producing films, as well as
exploitation costs which benefit future periods. The Company will amortize film
costs using the individual-film-forecast-computation method. This method
amortizes costs in the same ratio that current gross revenues bear to
anticipated total gross revenues for each particular film. Film costs are stated
at the lower of unamortized historical cost or estimated net realizable value.
Film rights to books and screenplay's are reviewed periodically, and if it is
determined that a property will not be used in the production of a film, the
cost shall be charged to expense. In addition, if the story costs have not been
set for production within three years of acquisition, such costs shall be
written off. Unamortized production and exploitation costs of films will be
compared with net realizable value each reporting period on a film-by-film
basis. If the estimated future undiscounted cash flows associated with the film,
net of estimated future exploitation costs to be incurred, are not sufficient to
recover the film's carrying amount a writedown to net realizable value is
required (see Note B[9]).
F-7
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[2] Film and record production costs: (continued)
Record production costs represent the costs of producing a record master,
including musical talent, equipment, studio facility and talent for engineering,
directing and mixing. Such costs are capitalized if the past performance and
current popularity of the artist provides a sound basis for estimating that the
costs will be recovered from future sales, otherwise the costs are charged to
expense. Record production costs are being amortized over the estimated life of
the recorded performance in the same ratio that current gross revenues bear to
anticipated total gross revenues from the recording (see Note C).
[3] Inventory:
Inventory, consisting primarily of compact discs, cassettes and vinyls, is
valued at the lower of cost, on a first-in first-out basis or market. Market is
determined based on estimated selling price less costs of disposal. The
inventory on hand at September 30, 1999 principally relates to recordings which
have not yet been released and, accordingly, no sales of such inventory have
occurred (see Note C).
[4] Property, equipment and software costs:
Property and equipment, which is stated at cost, is depreciated using the
straight-line method over estimated useful lives of 5 to 7 years.
In accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", issued in March 1999
and adopted by the Company, qualifying costs of developing a website incurred
during the application development stage, consisting of external direct costs of
materials and services, are capitalized. All other costs incurred in connection
with internal use software are expensed as incurred. Capitalized website
software costs will be amortized on a straight-line basis over an estimated
useful life of two years commencing when the website is available for use.
[5] Income taxes:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to net operating loss carryforwards and for
differences between the financial statement carrying amounts and tax bases of
assets and liabilities. Deferred tax assets are reduced, if necessary, by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
[6] Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
[7] Net loss per share:
Basic and diluted net loss per share is calculated by dividing net loss by the
weighted average number of outstanding common shares during the period after
giving retroactive effect to the two for one stock split in February 2000.
F-8
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] Interim financial statements:
The financial statements as of May 31, 2000 and for the eight-month periods
ended May 31, 2000 and 1999 and for the period from December 5, 1997 (inception)
through May 31, 2000 are unaudited, but in the opinion of management the
financial statements include all adjustments consisting of normal recurring
accruals necessary for a fair presentation of the Company's financial position
and results of operations. Results of operations for interim periods are not
necessarily indicative of those to be achieved for full fiscal years.
[9] New accounting pronouncements:
On June 12, 2000, Statement of Position 00-2 "Accounting by Producers or
Distributors of Films" (SOP 00- 2) was issued by the American Institute of
Certified Public Accountants. SOP 00-2, which is effective for financial
statements for fiscal years beginning after December 15, 2000, supersedes
Statement of Financial Accounting Standards No. 53 "Financial Reporting by
Producers and Distributors of Motion Picture Films" which was rescinded in June
2000. The SOP, which provides guidance on generally accepted accounting
principles for all kinds of films, requires among other things, that if an event
or change in circumstance indicates that an entity should assess whether the
fair value of a film is less than its unamortized film costs, the entity should
determine the fair value of the film and write off the amount by which the
unamortized capitalized costs exceeds the film's fair value. The Company will
adopt SOP 00-2 in the first quarter of 2001 and does not expect the effect of
adoption will be material.
NOTE C - FILM AND RECORD PRODUCTION COSTS
Film and record production costs are summarized as follows:
<TABLE>
<CAPTION>
May 31, September 30,
2000 1999 1998
------- -------- -------
<S> <C> <C> <C>
Film costs(a):
-------------
In development or preproduction $125,895 $125,895 $42,842
-------- -------- -------
Record masters:
--------------
In process 0 36,195 38,157
-------- -------- -------
Released 0 87,930 0
Accumulated amortization 0 (5,276) 0
-------- -------- -------
0 82,654 0
-------- -------- -------
Completed and not released 0 0 0
-------- -------- -------
Total record masters 0 118,849 38,157
-------- -------- -------
Film and record production costs, net $125,895 $244,744 $80,999
======== ======== =======
<FN>
(a) Consists primarily of expenditures for film
rights to books and screenplays.
</FN>
</TABLE>
F-9
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE C - FILM AND RECORD PRODUCTION COSTS (CONTINUED)
Released record masters as of September 30, 1999 relate to records which have
been released in 1999 on a limited basis. Recovery of record master costs is
dependent on, among other factors, obtaining sufficient financing for promotion
and distribution of the related recordings. The Company's inability to obtain
sufficient financing for promotion and distribution and the resulting delay in
releasing or expanding the release of the recordings into the marketplace, has
had an adverse impact on future record sales and, in management's opinion, will
result in future gross revenues which will not be sufficient to recover the
carrying value of the unamortized record production costs and related inventory
of discs, cassettes and vinyls. Accordingly, as of May 31, 2000, the Company
wrote off the carrying value of its record masters and related inventory of
$118,849 and $19,289, respectively.
NOTE D - PROPERTY, EQUIPMENT AND SOFTWARE
Property, equipment and software are summarized as follows:
<TABLE>
<CAPTION>
May 31, September 30,
2000 1999 1998
------- ---- ----
<S> <C> <C> <C>
Equipment $11,817 $ 9,496 $2,171
Website 29,609 2,109
Furniture and fixture 1,499 1,499
------- ------- ------
42,925 13,104 2,171
Less accumulated depreciation 2,733 1,490 217
------- ------- ------
$40,192 $11,614 $1,954
======= ======= ======
</TABLE>
NOTE E - AMOUNTS DUE FROM/TO RELATED PARTIES
During fiscal 1998, the Company purchased the rights to eleven motion picture
projects from a company controlled by a then founding stockholder (the
"Seller"), for an aggregate purchase price of $60,000 in cash. Subsequently, due
to uncertainties relating to the Seller's ownership rights, both parties
canceled the agreement. During fiscal 1999, $30,000 of the purchase price was
repaid. In January 2000, the Seller executed an unsecured promissory note in the
amount of $30,000 bearing interest at the rate of 8%, which is payable on
September 30, 2000.
During fiscal 1998, the Company advanced $50,000 to a company controlled by then
founding stockholder, $30,000 of which was repaid in fiscal 1999. In January
2000, the advance was converted into an unsecured promissory note in the
principal amount of $20,000 bearing interest at 8% per annum, payable on
September 30, 2000.
During fiscal 1998 and 1999, respectively, a stockholder made working capital
cash advances to the Company of $87,590 and $44,000, which are due on demand
with interest computed at the rate of 8% per annum.
F-10
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE F - STOCKHOLDERS' EQUITY
In March 1998, the Company commenced an offering of its common stock in a
private placement to sell a maximum of 800,000 shares at $1.25 per share. During
fiscal years ended September 30, 1998 and 1999, respectively, the Company issued
185,600 and 180,000 common shares and received net proceeds of $218,444 and
$224,000 in connection with the offering.
In April 1998, two founding stockholders resigned as officers and directors of
the Company and transferred an aggregate of 1,750,000 of their shares of common
stock to other founding stockholders, and also transferred 100,000 shares to an
individual for services rendered to the Company. The shares transferred for
services rendered have been accounted for as if the shares were contributed to
the capital of the Company by the founding stockholders and subsequently
reissued to the employee in payment of compensation of $125,000, which
represents the fair value of the stock issued ($1.25 per share).
In December 1999, the Company amended its Certificate of Incorporation to
increase the authorized number of shares to 26,000,000 shares, of which
25,000,000 shares are designated as common stock and 1,000,000 shares are
designated as preferred stock. Further, on February 16, 2000 the Company
declared a two-for-one split of its common stock. Retroactive effect has been
given to the amendment and the stock split in the accompanying financial
statements.
NOTE G - INCOME TAXES
At May 31, 2000 and September 30, 1999 and 1998, the Company had available
federal net operating loss carryforwards to reduce future taxable income of
approximately $380,000, $299,000 and $221,000, respectively. The net operating
loss carryforwards expire in 2020, 2019 and 2018. The Company's ability to
utilize its net operating loss carryforwards may be subject to annual
limitations pursuant to Section 382 of the Internal Revenue Code if future
changes in ownership occur.
Deferred tax assets relate to the following:
<TABLE>
<CAPTION>
May 31, September 30,
2000 1999 1998
------ ---- ----
<S> <C> <C> <C>
Record master costs written off $ 48,000
Inventory written off 8,000
Net operating loss carryforwards 151,000 $120,000 $88,000
-------- -------- -------
207,000 120,000 88,000
Valuation allowance (207,000) (120,000) (88,000)
-------- -------- -------
$ 0 $ 0 $ 0
======== ======== =======
</TABLE>
The Company has not recorded a benefit from its net operating loss carryforwards
because realization of the benefit is uncertain and therefore a valuation
allowance of $88,000 in 1998 which was increased by $32,000 in the year ended
September 30, 1999 and further increased by $87,000 during the period October 1,
1999 through May 31, 2000 has been provided to offset the deferred tax assets.
F-11
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE G - INCOME TAXES (CONTINUED)
The following presents a reconciliation of the expected income tax benefit based
on the federal statutory tax rate of 34% and the actual income tax benefit
reflected in the statements of operations:
<TABLE>
<CAPTION>
Eight Months Ended Year Ended
May 31, September 30,
------------------ ------------
2000 1999 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computed tax benefit at statutory rate $(74,000) $(17,000) $(28,000) $(75,000)
State income tax benefit, not of
federal effect (13,000) (3,000) (4,000) (13,000)
Provision of valuation allowance 87,000 20,000 32,000 88,000
-------- -------- -------- --------
Actual income tax benefit $ 0 $ 0 $ 0 $ 0
======== ======== ======== ========
</TABLE>
NOTE H - COMMITMENTS
The Company rents office space for two offices on a month to month basis. The
Company entered into an operating lease for a vehicle which provides for minimum
annual rentals as follows:
<TABLE>
<CAPTION>
Year Ending
September 30, Amount
------------ ------
<S> <C>
2000 $ 6,900
2001 6,900
2002 5,175
-------
$18,975
=======
</TABLE>
Rent expense was $18,900, $7,400, $12,852 and $14,822 for the years ended
September 30, 1999 and 1998 and the eight months ended May 31, 2000 and 1999,
respectively.
The Company has incurred certain costs and entered into agreements to obtain
rights and/or options in certain properties in connection with its motion
picture initiatives. Such agreements require the Company to pay to the
property's owner or licensor additional compensation in the form of fees and
royalties (the "Additional Payments"), if the Company successfully enters into
distribution and/or production arrangements with third parties. The Additional
Payments, if payable, are generally based on a percentage of the production
budget for a feature or a stated percentage of revenues, as defined. As of
September 30, 1999 and May 31, 2000, no such distribution and production
agreements have been entered into which would result in an obligation of
Additional Payments.
In October 1999, the Company entered into an agreement for the development of a
website for a total commitment of approximately $35,000.
F-12
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE I - BUSINESS SEGMENT INFORMATION
The Company adopted the provisions of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
requires public companies to report financial and descriptive information about
their reportable operating segments. The Company identifies its operating
segments based on how management internally evaluates separate financial
information, business activities and management responsibility. The Company's
current operations (see Note A) constitute two reportable operating segments and
a corporate headquarters, as follows:
<TABLE>
<CAPTION>
Motion
Picture and Other -
Television Music Corporate Consolidated
----------- ----- --------- ------------
<S> <C> <C> <C> <C>
Year ended September 30, 1999:
Revenues $ 20,750 $ 20,750
Operating income (loss) 9,609 $(78,215) (68,606)
Depreciation and amortization 5,276 1,273 6,549
Identifiable assets $125,895 118,849 169,121 413,865
Capital expenditure 10,933 10,933
Film and record production costs 83,053 85,968 169,021
Period ended September 30, 1998:
Revenues 0
Operating loss (125,000) (91,563) (216,563)
Depreciation and amortization 217 217
Identifiable assets 42,842 38,157 135,472 216,471
Capital expenditures 2,171 2,171
Film and record production costs 42,842 38,157 80,999
Eight months ended May 31, 2000:
Revenues 0
Operating loss (138,138) (73,505) (211,643)
Depreciation and amortization 1,243 1,243
Identifiable assets 125,895 469,639 595,534
Capital expenditure 29,821 29,821
Film and record production costs 0
Eight months ended May 31,1999:
Revenues 19,410 19,410
Operating income (loss) 9,283 (53,409) (44,126)
Depreciation and amortization 4,304 855 5,159
Identifiable assets 118,573 101,630 210,143 430,346
Capital expenditure 10,282 10,282
Film and record production costs 139,204 139,204
</TABLE>
F-13
<PAGE>
HARBOUR ENTERTAINMENT INC.
(formerly Big Dog Entertainment Inc.)
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to May 31, 2000 and the eight-month periods ended
May 31, 2000 and 1999)
NOTE J - PROPOSED PUBLIC OFFERING
The Company signed a letter of intent with an underwriter with respect to a
proposed public offering of shares of common stock. There is no assurance that
such offering will be consummated. In connection therewith, the Company
anticipates incurring substantial expenses which, if the offering is not
consummated, will be charged to expense. Deferred offering costs at September
30, 1999 and May 31, 2000, respectively, amount to $18,969 and $235,177. The
Company is obligated to pay a fee to the underwriter of $25,000 if it decides
not to pursue the public offering.
NOTE K - STOCK OPTION PLAN
On June 1, 2000, the Company's Board of Directors adopted the 2000 Stock Option
Plan which provides for option grants to directors, officers, employees or
consultants to purchase up to 1,500,000 shares of common stock at an exercise
price equal to the fair market value on the grant date. The options granted
under the plan are nonqualified options with maximum terms of ten years. The
plan terminates on May 31, 2010.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitations on Liability of Directors. Under Section 145 of the Delaware
General Corporation Law, a corporation may indemnify a director, officer,
employee or agent of the corporation (or a person who 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 the person 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. In the
case of an action brought by or in the right of a corporation, the corporation
may indemnify a director, officer, employee or agent of the corporation (or a
person who 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 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, except that no indemnification may 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 a court finds that, in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
Indemnification for Directors and Officers. Under Delaware law, a
corporation may indemnify its present and former directors and officers for a
variety of court or administrative proceedings. We have adopted a provision
which requires us to indemnify and hold harmless any person involved in any
action, suit or proceeding because that person is or was a director or officer
of ours. This provision does not, however, require us to indemnify an officer or
director in a proceeding they initiate without the authorization of our
directors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of ours
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission indemnification for
liabilities is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
Insurance for Directors and Officers. Under Delaware law, a corporation may
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. We have adopted a provision which permits
us to maintain insurance to protect us and our directors and officers against
expenses, liabilities and losses whether or not we would have the power to
indemnify these persons under Delaware law. We intend to have in place at or
promptly after the closing of this offering a directors' and officers' liability
and company reimbursement liability insurance policy.
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth our estimated expenses (other than selling
commissions and other fees paid to the underwriters) payable in connection with
the issuance and distribution of the securities being registered. Except for the
SEC and NASD filing fees, all expenses have been estimated.
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . $ 3,168
Nasdaq Small Cap Market Exchange Listing Fee.. . *
NASD Filing Fee. . . . . . . . . . . . . . . . . *
Accounting Fees and Expenses . . . . . . . . . . *
Printing and Engraving . . . . . . . . . . . . . *
Legal Fees and Expenses. . . . . . . . . . . . . *
Blue Sky Fees and Expenses . . . . . . . . . . . *
Transfer Agent and Registrar Fees. . . . . . . . *
Miscellaneous Expenses . . . . . . . . . . . . . *
--------
Total.. . . . . . . . . . . . . . . . . . . $425,000
<FN>
-----
* To be filed by amendment
</FN>
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since inception (December 5, 1997), we have issued unregistered securities
in the transactions described below:
In March 1998, we commenced an offering of our common stock in a private
placement to sell a maximum of 800,000 shares at $1.25 per share. During fiscal
years ended September 30, 1998 and 1999, respectively, we issued 185,600 and
180,000 common shares and received net proceeds of $218,444 and $224,000 in
connection with the offering.
In April 1998, two founding stockholders resigned as officers and directors
of the Company and transferred an aggregate of 1,750,000 of their shares of
common stock to other founding stockholders, and also transferred 100,000 shares
to an individual for services rendered to the Company.
From November 1999 to February 2000, we sold in a private placement 133,600
shares of common stock at $1.25 per share and in April 2000 sold 61,200 shares
of common stock at $2.50 per share.
All of our securities referred to above were issued in reliance on the
exemption from registration under the Securities Act provided by Section 4(2) of
the Act. Such sales were made in privately negotiated transactions without any
general solicitation or advertising. Such persons were given access to relevant
information concerning the Company and represented that they were acquiring the
securities for investment and not for resale. The stock certificates issued to
all of the above investors bear restrictive legends and are subject to stop
transfer orders.
<PAGE>
ITEM 27. EXHIBITS
The following exhibits are filed as part of this Registration Statement
with the Securities and Exchange Commission pursuant to Item 601 of Regulation
S-B. All exhibits refer to Harbour Entertainment Inc. unless otherwise
indicated.
Exhibit No. Description
----------- -----------
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation, as amended
3.2 By-Laws*
4.1 Specimen common stock certificate**
5.1 Form of Opinion of Blau, Kramer, Wactlar & Lieberman, P. C. regarding the
legality of the securities being registered
10.1 Form of Indemnification Agreement
10.2 Form of Employment Agreement
10.3 Body of Work Agreement, dated February 4, 1999 between the Company and
Warren Murphy
10.4 Agreement, dated January 15, 1998 between Brenda Durmann and Prelude
Development, Inc.
10.5 Agreement, dated February 26, 1999 between George Graham and Prelude
Development, Inc.
10.6 Agreement, dated February 11, 1999 between A&R Online, Inc. and Prelude
Development, Inc.
10.7 Agreement, dated November 4, 1999 between PokoLoco and Prelude Development,
Inc.
10.8 Agreement, dated August 1, 1999 between Sumthing Distribution and Prelude
Music & Filmworks
10.9 Option Purchase Agreement, dated February 18, 1999 between the Company and
Warren Murphy
10.10 2000 Stock Option Plan
23.1 Consent of Blau, Kramer, Wactlar & Lieberman, P. C. (included in Exhibit
5.1)
23.2 Consent of Richard A. Eisner & Co., LLP
25.1 Powers of Attorney
27 Financial Data Schedule
--------------
* Previously filed
** To be filed by amendment
<PAGE>
ITEM 28. UNDERTAKINGS
The Company hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement; and
(iii)Include any additional or changed material information on the
plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment 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.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) of (4), or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
For determining any liability under the Securities Act, treat each post
effective amendment that contains a form of prospectus as a new registration
statement for the securities offered in the registration statement, and the
offering of such securities at that time as the initial bona fide offering of
those securities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company 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 Company 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 such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
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 for filing on Form SB-2 and has authorized Amendment No. 1
to this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Ronkonkoma, New York on the 29th day of June,
2000.
HARBOUR ENTERTAINMENT INC.
By: /s/ Marlowe R. Walker
Marlowe R. Walker
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
Know all persons by these presents, that the persons whose signatures appear
below each severally constitutes and appoints Marlowe R. Walker and Robert S.
Rosen, and each of them, as true and lawful attorneys-in-fact and agents, with
full powers of substitution and resubstitution, for them in their name, place
and stead, in any and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this registration statement and
to sign any registration statement (and any post-effective amendments thereto)
relating to the same offering as this registration statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do, or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this registration
statement was signed by the following persons in capacities indicated on June
29, 2000.
SIGNATURE TITLE
--------- -----
President, Chief Executive Officer,
Secretary, Treasurer and Director
/s/ Marlowe R. Walker (Principal Executive Officer)
Marlowe R. Walker
Chief Financial Officer (Principal Financial
/s/ Robert S. Rosen Officer and Principal Accounting Officer)
Robert S. Rosen
/s/ Robert E. DiMilia Director
Robert E. DiMilia
/s/ Thomas B. Foley Director
Thomas B. Foley
/s/ David G. Tricamo Director
David G. Tricamo
/s/ Christopher Grega Director
Christopher Grega
