FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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 . . . . . . . . . 2,000,000 $6.00 $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 APRIL 28, 2000.
2,000,000 SHARES
BIG DOG ENTERTAINMENT, INC.
COMMON STOCK
This is an initial public offering of 2,000,000 shares (the "Shares") of
common stock of Big Dog Entertainment, Inc. (the "Company"). We anticipate that
the initial public offering price will be $6.00 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 does not have an expiration date. There are no minimum
purchase requirements in the Offering. 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 $6.00
Underwriting discounts and commissions (10%) . $ 800,000 $ 1,200,000 $6.00
Proceeds, before expenses, to Big Dog. . . . . $7,200,000 $10,800,000 $6.00
</TABLE>
We have issued to the underwriters warrants to purchase up to 200,000
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 is not
complete and may not contain all of the information that investors should
consider before investing in our common stock.
OUR BUSINESS
Big Dog Entertainment, Inc. ("Big Dog" or the "Company") 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 acquisition and development of Stapleton Studios
and Recreation Center in Staten Island, New York through a
51% owned subsidiary;
-- 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. Our website
can be accessed at BigDogEnt.com. Information contained in our website is not
part of this prospectus.
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. We presently operate through three basic
divisions; our Feature Films Division, Theatrical Distribution Division, and
Music Division. All references to "Big Dog Entertainment, Inc.," "we," "our," or
"us" include the operations of Big Dog Entertainment and its various divisions.
THE OFFERING
Common stock
offered by us... Up to 2,000,000 shares
Common stock to
be outstanding
after this
offering........ 6,459,200 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;
- Acquisition 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>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, our 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.
<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
Three Months Three Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
December 31, December 31, December 31, September 30, September 30, September 30,
Statements of Operations Data: 1999 1998 1999 1999 1998 1999
----------- ---------- ---------- ------------- ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Music sales $ 1,750 $ 20,750 $ 20,750 $ 20,750
---------- --------- --------- ----------
Operating Costs:
Cost of record sales 829 11,141 11,141 11,141
General and $ 30,250 10,814 200,028 78,215 $ 91,563 169,778
Administrative
Noncash compensation 125,000 125,000 125,000
expense ---------- ---------- --------- --------- ---------- ----------
Total costs and expenses 30,250 11,643 336,169 89,356 216,563 305,919
---------- ---------- --------- --------- ---------- ----------
Loss from operations (30,250) (9,893) (315,419) (68,606) (216,563) (285,169)
Interest expense to shareholder 2,632 1,933 16,623 9,605 4,386 13,991
expense ---------- ---------- --------- --------- ---------- ----------
Net loss $ (32,882) $ (11,826) $(332,042) $ (78,211) $ (220,949) $ (299,160)
========== ========== ========= ========= ========== ==========
Net loss per share - basic and diluted $(.01) $.00 $(.02) $(.05)
===== ==== ===== =====
Weighted average number of shares
outstanding - basic and diluted 4,390,960 4,195,868 4,274,776 4,107,460
========= ========= ========= =========
September 30, December 31,
1999 1999
------------ ------------
(unaudited)
Balance Sheet Data:
Cash $ 56,904 $ 84,389
Working capital (18,363) 6,992
Total assets 413,865 501,315
Total long-term debt 0 0
Total liabilities 145,581 148,913
Total stockholders' equity 268,284 352,402
</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 December 31, 1999, we
sustained losses of $332,000 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.
THE ENTERTAINMENT INDUSTRY IS COMPETITIVE, SPECULATIVE AND
UNPREDICTABLE
Risks of Feature Film Production, Acquisition and Distribution
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.
A substantial number of feature films do not generate profits or the return
of funds invested to produce or market and distribute them. 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. In
particular, the apparent demand in any domestic or foreign media market for a
film may change quickly and unpredictably. 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. In order to acquire scripts with greater commercial potential, we
may be forced to commit larger sums to acquire scripts than we have in the past
and to increase our involvement in the production of films. Larger acquisition
costs and marketing commitments and involvement in the financing and production
of feature films will expose us to greater business risks than in the past.
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.
We plan to develop and produce certain films independently. This method of
production places all of the financing requirements for production solely on us.
These development plans are contingent on our possession of adequate financing
to commence the production of a film or complete such production once it is
already commenced.
<PAGE>
We may seek financial assistance for the production of a film from a film
finance company in certain cases. In other cases, we may seek to co-produce a
film and share equally in the costs of production.
Special Risks Associated With 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
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, certain of 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. We
may nevertheless choose to be involved in the distribution or production of such
a film after considering other factors, including the screenplay, the production
budget, the involvement of any recognized performers, the apparent demand for
films in the genre, the experience level of the technical crew, and the overall
film industry experience of the director.
Limited Scope of Production
Principal photography of low budget films utilizes actors, actresses and
technical personnel limited in number and professional experience, and the
minimum in quantity and quality of camera and sound equipment. During
post-production, similar limitations apply to the special and optical effects,
sound enhancement and sound effects, music and the editing of such films.
Accordingly, such films generally appear more limited in production values and
scope than competing films produced for larger budgets.
Lack of Completion Insurance
Certain of our films will 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 of certain of our 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.
Risks of Theatrical Distribution
We plan to distribute films and videos through distribution arrangements
with major film companies as well as arrangements with local distributors and
subdistributors. Our profitable distribution of a particular film will depend on
our ability to seek out a major film company with a large distribution network
already in place or a local distributor which is effective in the local market
which it services. If we are unable to team up with an effective distribution
network, our ability to distribute a film may be materially affected.
<PAGE>
Distributing films and videos in domestic and foreign markets is extremely
competitive. Additionally, the marketing, advertising and other costs of
distribution must be paid up front, and these costs can be substantial. The
intense competition combined with the upfront costs associated with film
distribution present a risk that we may spend significant amounts to market a
film 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;
-- economic conditions in local markets; and
-- decreased demand for films from local wholesales and retailers.
Risks of Home Video Distribution
The business of distributing films in the domestic home video market is
also characterized by substantial marketing and advertising costs and intense
competition. Videocassettes are generally sold by film distributors to wholesale
distributors which, in turn, sell videocassettes to retail outlets. To create
demand by retailers for a feature film which has had little if any of the
advertising and publicity associated with significant theatrical distribution,
distributors must advertise their films at substantial cost in trade journals
and other publications. Demand by retailers or wholesale distributors for any
particular film is unpredictable. Furthermore, independent distributors, such as
Big Dog, must generally agree to accept unlimited returns from wholesale
distributors for credit or refund.
Risks of Distribution in Foreign Markets
The business of distributing feature films in foreign countries is also
intensely competitive and speculative. Distributors of feature films to foreign
countries must attend various international film festivals and conventions, also
known as film markets. Attendance of such markets is costly, and distributors
such as Big Dog must incur substantial costs advertising their films in trade
journals and other publications.
Distributors, such as Big Dog, attempt to enter into arrangements with
local subdistributors which distribute films in their respective countries. The
subdistributors typically encounter similar business conditions with respect to
the distribution of films in their respective countries as those encountered by
the Company in the various domestic media markets. In many foreign countries, we
(and our local subdistributors) also face greater risk from unauthorized video
cassette duplication or "piracy." Arrangements between us and our foreign
subdistributors may involve payment delays resulting from local economic
conditions, currency fluctuations and the timing of a film's delivery.
Risks Associated with the Music Division
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.
The primary function of the Music Division is to locate talent and secure a
recording contract with the artist, who in turn makes a recording which we then
sell either through a large distribution network connected to a major recording
label or several smaller distribution networks.
<PAGE>
In order to complete this process profitably we must:
-- secure a talented artist with quality material or compositions for
recording;
-- provide adequate funds for the artist to make the recording;
-- obtain a recorded product with commercial appeal;
-- advance up-front costs to mix, master, edit and reproduce the
recording;
-- secure a distributor or distribution network for each market in which
the recording will be sold; and
-- advance the necessary funds to market, advertise and otherwise promote
the recording.
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.
Risks Associated with the potential acquisition of Stapleton Studios
We have not yet secured an ownership interest in the Stapleton Studios
project. Although we are in preliminary negotiations to acquire such an
interest, investors should not rely on this acquisition as a basis for an
investment in our common stock.
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS OR ACHIEVE
PROFITABILITY.
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. To achieve and maintain profitablility, 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;
-- design, complete and update our website on an ongoing basis; and
-- control expenses.
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.
<PAGE>
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.
IF WE DO NOT DEVELOP AN ADEQUATE DISTRIBUTION NETWORK FOR OUR FILMS AND MUSIC
RECORDINGS, WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY.
We must secure effective and affordable distribution arrangements for our
existing recordings and feature films. Increased distribution is essential to
achieve profitability.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.
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.
Because our business is a capital intensive business, we may require additional
funding sooner than anticipated. In addition, unplanned acquisition and
development opportunities and other contingencies may arise, which could require
us to raise additional capital. We cannot be certain that additional financing
will be available on commercially reasonable terms, if at all. 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.
THERE IS INTENSE COMPETITION IN THE ENTERTAINMENT INDUSTRY.
We are operating in the general world of movie production, entertainment and
leisure time activities which is among the most highly competitive industries in
the world. In its attempt to secure a portion of the entertainment dollar, we
will be competing against many larger production and development companies with
substantial financial resources and a history of quality and commercially
successful products as well as other similar operations that may enter the
marketplace.
<PAGE>
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. Our success is dependent upon our ability to retain
our key management and to attract, assimilate and retain other highly qualified
employees. 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 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
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 $4.34 per
share ($4.77 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 $6.00 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.
Accordingly, existing shareholders will benefit disproportionately from this
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.
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.
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>
The shares that we are offering will be freely tradable without restriction
except for any shares purchased by our "affiliates" as defined in Rule 144 under
the Securities Act.
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.
Our remaining _________ outstanding shares are "restricted securities" as
defined in Rule 144. Those shares may only be resold if there is an effective
registration statement under the Securities Act covering those shares or an
exemption from registration under Rule 144 or otherwise is available.
Furthermore, we will be issuing up to 200,000 warrants to the underwriters upon
the closing of this offering.
These warrants are likely to be exercised, if at all, at a time when we
otherwise could obtain a price for the sale of our shares that is higher than
the exercise price per share of the options or warrants. Any such exercise or
the possibility of such exercise may impede our efforts to obtain additional
financing through the sale of additional securities or make such financing more
costly.
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
____% 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 % of our outstanding common stock (____% 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.
<PAGE>
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 statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "could," "may," "will," "should," "expect," "plan,"
"anticipate, " "believe, " "estimate, " "predict, " "potential" or "continue, "
the negative of such terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks described above and in other parts of this prospectus. These factors
may cause our actual results to differ materially from any forward-looking
statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform them to actual results or to
changes in our expectations.
WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS AND MAY INFRINGE ON THE
PROPRIETARY RIGHTS OF OTHERS.
We regard our scripts, rights to films, copyrights and other intangible and
similar intellectual property as important to our success. However, 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 cannot represent that
third parties will not bring claims of copyright or trademark infringement
against us or claim that our use of certain 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%
Acquisition of Stapleton Studios....... 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.
Acquisition of Stapleton Studios - 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
<PAGE>
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.
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
December 31, 1999 and as adjusted to give effect to the sale of both the minimum
number of shares (1,333,333) and the maximum number of shares (2,000,000)
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>
December 31, 1999
--------------------------------------------
As Adjusted As Adjusted
Actual Minimum Maximum
------ ------- -------
<S> <C> <C> <C>
Accrued expenses $ 700 $ 700 $ 700
Interest payable to stockholder 16,623 16,623 16,623
Demand loan payable to stockholder 131,590 131,590 131,590
-------- -------- --------
$148,913 $148,913 $148,913
======== ======== ========
Preferred stock-$.001 par value;
1,000,000 shares authorized;
none issued and outstanding
Common stock-$.001 par value;
25,000,000 shares authorized;
4,459,200 shares issued and
outstanding; 5,792,533 and
6,459,200 shares issued and
outstanding, as adjusted 4,459 5,793 6,459
Additional paid-in capital 679,985 7,453,651 11,052,985
Deficit accumulated during
development stage (332,042) (332,042) (332,042)
--------- ---------- ----------
Total stockholders' equity 352,402 7,127,402 10,727,402
--------- ---------- ----------
Total capitalization $ 352,402 $7,127,402 $10,727,402
========= ========== ===========
</TABLE>
<PAGE>
DILUTION
As of December 31, 1999, the Company had a positive net tangible book value
(total tangible assets less total liabilities, of $287,828 or approximately $.06
per share of common stock. After giving effect to the completion of this
Offering, the proforma net tangible book value of the Company at December 31,
1999 would be $10,727,402, or approximately $1.66 per share if the maximum
number of shares is sold and $7,127,402, or approximately $1.23 per share if the
minimum number of shares is sold. This represents an immediate increase in net
tangible book value of approximately $1.17 to existing stockholders if the
minimum number of shares are sold and approximately $1.60 if the maximum number
of shares are sold and an immediate dilution in net tangible book value of $4.77
per share to purchasers of shares in this Offering if the minimum number of
shares is sold and $4.34 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 1,333,333 or the maximum of 2,000,000 shares are
sold.
<TABLE>
<CAPTION>
Per Share
---------
Minimum Maximum
------- -------
<S> <C> <C>
Assumed Public Offering Price $6.00 $6.00
Net Tangible Book Value at December 31, 1999 .06 .06
Increase per share attributable to new investors 1.17 1.60
Proforma net tangible book value per share after Offering 1.23 1.66
Dilution per share to new investors 4.77 4.34
</TABLE>
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth our selected financial information as of and
for the periods indicated. We derived the historical selected financial data as
of September 30, 1999 for the period December 5, 1997 (inception) through
September 30, 1998, the year ended September 30, 1999 and for the period
December 5, 1997 (inception) through September 30, 1999 from our audited
financial statements and notes thereto included elsewhere in the prospectus. The
Statement of Operations data presented for the three months ended December 31,
1999, the three months ended December 31, 1998 and for the period December 5,
1997 (inception) through December 31, 1999, and the Balance Sheet data at
December 31, 1999, are unaudited and were prepared by management of the Company
on the same basis as the audited financial statements of Big Dog Entertainment,
Inc. included elsewhere herein and in the opinion of management, include all
adjustments consisting of normal recurring adjustments, necessary to present the
information set forth therein. The financial data for the interim periods
presented are not necessarily indicative of the results to be reported for the
full year. You should read the data presented below in conjunction with the
discussion under "Plan of Operation" and the financial statements and
accompanying notes appearing elsewhere in the prospectus.
<TABLE>
<CAPTION>
Period from Period from Period from
December 5, December 5, December 5,
1997 1997 1997
Three Months Three Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
December 31, December 31, December 31, September 30, September 30, September 30,
Statements of Operations Data: 1999 1998 1999 1999 1998 1999
----------- ---------- ---------- ------------- ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Music sales $ 1,750 $ 20,750 $ 20,750 $ 20,750
--------- --------- --------- ---------
Operating Costs:
Cost of record sales 829 11,141 11,141 11,141
General and $ 30,250 10,814 200,028 78,215 $ 91,563 169,778
Administrative
Noncash compensation 25,000 125,000 125,000
expense ---------- --------- --------- --------- ---------- ---------
Total costs and expenses 30,250 11,643 336,169 89,356 216,563 305,919
---------- --------- --------- --------- ---------- ---------
Loss from operations (30,250) (9,893) (315,419) (68,606) (216,563) (285,169)
Interest expense to shareholder 2,632 1,933 16,623 9,605 4,386 13,991
---------- --------- --------- --------- ---------- ---------
Net loss $ (32,882) $ (11,826) $(332,042) $ (78,211) $ (220,949) $(299,160)
========== ========= ========= ========= ========== =========
Net loss per share - basic and diluted $(.01) $.00 $(.02) $(.05)
===== ==== ===== =====
Weighted average number of shares
outstanding - basic and diluted 4,390,960 4,195,868 4,274,776 4,107,460
========== ========= ========= ==========
September 30, December 31,
1999 1999
------------- -------------
(unaudited)
Balance Sheet Data:
Cash $ 56,904 $ 84,389
Working capital (18,363) 6,992
Total assets 413,865 501,315
Total long-term debt 0 0
Total liabilities 145,581 148,913
Total stockholders' equity 268,284 352,402
</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. 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 a controlling equity and management participation 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 2,000,000 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>
Music Division
We have already released two singles recorded by artists signed by Prelude
Music. We have another single "Pretty Black" and a full album "Uptown Comedy
Club", volume I, completed, copies manufactured, and ready for promotion and
distribution. Our arrangement with the Uptown Comedy Club allows Prelude Music
to record and distribute additional albums. We intend to allocate $1,000,000
from the proceeds of our public offering toward the promotion of the three
singles and one album already completed and the production, promotion and
distribution of additional albums. As in the feature film division, we believe
that there are many aspects of the music business where we may be able to
participate and receive ownership, production and distribution credits without a
large expenditure of funds or the assumption of any major financial risks.
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 will have an opportunity to participate and acquire an equity
ownership in 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 secure a controlling interest in Stapleton Recreational
Properties, Inc. ("Stapleton"). Stapleton has been negotiating with the City of
New York to secure either a long term lease or similar rights that would enable
it 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 totally contingent on our negotiating a favourable lease
arrangement with the City of New York. We have recently been in contact with
several sources of additional investment capital and lending institutions that
have indicated a strong desire to participate with us, on terms favourable to
the Company, in the development of this project. Clearly, and consistent with
our policy of caution and minimizing our financial risk, we will commit no funds
on speculation. We believe, however, that since this land is so valuable and
attractive for such a variety of uses, that any association we may be able to
secure in the development of Stapleton, will prove to be financially beneficial
to us.
<PAGE>
Finally, we believe that we have been fortunate to have retained quality
executives with substantial experience in the management and operation of each
of our divisions.
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 September 30, 1999 of ($299,160). At September 30, 1999, we
had a cumulative available federal net operating loss carryforwards to reduce
future taxable income of approximately ($299,000). This net operating loss
carryforwards expires in 2018 and 2019. 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 net operating loss
carryforwards.
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. We sold our common
stock at $1.25 per share to suitable investors and have realized a total of
$589,000 to date. We have recently split our outstanding common shares on a 2
for 1 basis which effectively doubles the number of outstanding shares and
reduces the cost of the shares purchased from $2.50 to $1.25 per share. Loans
totalling $131,590 were made to us which bear interest at 8% per annum.
As of December 31, 1999, we had an accumulated deficit during our
development stage (inception - December 31, 1999) of ($332,042).
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.
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 acquisition and development of Stapleton
Studios and Recreation Center in Staten Island, New York through
a 51% owned subsidiary;
-- The retention of additional highly qualified and experienced
executives to operate our various divisions;
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
<PAGE>
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.
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.
<PAGE>
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 Big Dog and Spider-Vision, Inc. in this fashion.
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.
<PAGE>
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 whose one dozen awards include best book Edgar by 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 certain
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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 Durham, 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. The
CD(s) have been manufactured and are ready for distribution;
-- Signed two rap artists, Pudgey and Pretty Black, to recording
contracts. Pretty Black's first single has been completed and is
ready for distribution; Pretty Black's first full length release
and Pudgey's first single intends to be released by Prelude Music
in the coming year;
-- Entered into an agreement with the A&R Entertainment, Inc. for a
live recording of various performances at the Uptown Comedy Club,
located in New York City, which has resulted in the production
and manufacture of a comedy album which is ready for
distribution;
-- Entered into a joint venture with Alex Weir, a prominent member
of the Latin Music community, which will become Prelude Latina -
the Latin music division of Prelude Music;
-- Signed the Latino singing group "Poco Loco" to a recording
contract which will yield a full- length release under the
Prelude Latina label in the upcoming year; and
-- 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.
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. Prelude's overall
operations are intended to be composed of the following:
-- Artist & Repertoire
-- Sales, Marketing and Promotion
-- Product Management
-- Artist Development
-- Post Production
-- International Sale Representatives
<PAGE>
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.
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. Mr. DiMilia has received indications from
Frendolph Construction Corp. ("FCC"), a Long Island, New York-based developer
and site manager, that upon the acquisition of a ground lease by Mr. DiMilia,
that FCC would be interested in the development and site management of the
Stapleton project and would attempt to secure financing up to $25 million. The
estimated cost for the re-development of Stapleton Studios is $21 million.
<PAGE>
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.
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.
<PAGE>
EMPLOYEES
As of January 1, 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
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
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. Mr. Walker brings to the
Company an extensive background in program management including contracts,
subcontracts, budgeting, costs and scheduling. 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 Big Dog 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. Aside
from his independent feature film production activities, he has also been
integrally involved in the distribution of feature films, television cable
programming and specialty products on an international basis. He has represented
independent films, film and media companies at every sales forum around the
world including, The Cannes Film Festival, MIFED in Milan, the Monte Carlo TV
festival in Monaco, Sundance Film Festival, Independent Feature Project,
American Film Market and NAPTE in the U.S. and others. His Producer's Marketing
Group, Ltd's 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. Some milestones: 1989 America's Cup program "Defeat into
Victory" (a BBC/Australian Broadcast Co) co-venture was syndicated in over 256
countries, live and on tape - one of the largest distribution of event
programming ever, brought professional boxing (Top Rank) and professional
wrestling (WWF and WCW) to the international marketplace for the first time;
first to bring Kodak documentary films to the wider international audience;
represented feature films for Independent International Pictures based on
platformed theatrical releases, cable premieres and television syndication; and,
represented the BBC not only here in the United States but also on a world-wide
basis.
<PAGE>
While at Films Around the World, (the premiere independent film
distributor) Mr. DiMilia was Vice President for Sales and Marketing 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 the Company were several Sundance Film Festival winners
including Chameleon Street, The Bronx War, and The Kiss-Off. Mr. DiMilia also
used his relationship with the major studios to broker distribution for feature
films with those major companies for national releases for such films as Blue
Sunshine, He Knows You're Alone, The Killing Hour, and Street Hunter.
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
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
<PAGE>
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.
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 $___ 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 December 31, 1999, 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.
<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 INCENTIVE PLAN AND EMPLOYEE BENEFIT PLAN
We presently have no stock incentive plan, employee benefit plans, or profit
sharing plans for our officers and employees.
CERTAIN TRANSACTIONS
During fiscal 1998, the Company purchased the rights to eleven motion
picture projects from a company controlled by a then founding shareholder (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, $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, a shareholder 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 4,459,200 shares outstanding before this
offering and 5,792,533 shares to be outstanding after the completion of this
offering if the minimum number of shares are sold, and 6,459,200 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 Big
Dog 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) 49.33% 37.98% 34.06%
Robert S. Rosen. . . . . . . . . . . *
Thomas B. Foley. . . . . . . . . . . 960,000 (1)(2) 21.53% 16.58% 14.86%
Christopher A. Grega . . . . . . . . 200,000 (1) 4.49% 3.45% 3.09%
David G. Tricamo . . . . . . . . . . 257,600 (1)(3) 5.78% 4.44% 3.98%
All executive officers, directors
and director nominees as a group
(5 persons). . . . . . . . . . . . . 3,617,600 81.13% 64.45% 56.01%
_________
<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, 60,000 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 _________
shares of our common stock issued and outstanding and up 200,000 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 $______, 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 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.
<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
<PAGE>
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
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>
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 certain 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.
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.
We have agreed to issue to the representative of the underwriters, for a
total of $_______, 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
<PAGE>
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.
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 __________________________, New York, New York.
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 "___." After this offering is effective, you may
obtain certain information about us on Nasdaq's Internet site
(http://www.Nasdaq-Amex.com).
<PAGE>
BIG DOG ENTERTAINMENT, INC.
<TABLE>
<CAPTION>
Contents
Page
----
Financial Statements
<S> <C>
Independent auditors' report F-2
Balance sheets as of September 30, 1999 and 1998 and December 31, 1999 (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 three months ended December
31, 1999 and 1998 (unaudited) and the period December 5, 1997 (inception)
through December 31, 1999 (unaudited) F-4
Statements of changes in stockholders' equity for the period from December 5,
1997 (inception) through September 30, 1999 and the three-month period ended
December 31, 1999 (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 three months ended December
31, 1999 and 1998 (unaudited) and the period December 5, 1997 (inception)
through December 31, 1999 (unaudited) F-6
Notes to financial statements F-7
F-1
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Big Dog Entertainment Inc.
Ronkonkoma, New York
We have audited the accompanying balance sheets of 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 Big Dog 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.
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
F-2
<PAGE>
BIG DOG ENTERTAINMENT INC.
(a development stage company)
<TABLE>
<CAPTION>
Balance Sheets
December 31, September 30,
1999 1999 1998
----------- -------- --------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash $ 84,389 $ 56,904 $ 15,528
Inventory 19,289 19,289 5,270
Other current assets 2,227 1,025
Amounts due from related parties 50,000 50,000 110,000
Film and record production costs, net 244,744 244,744 80,999
Property, equipment and software, net 32,772 11,614 1,954
Deferred offering costs 64,574 18,969
Other assets 3,320 11,320 2,720
-------- -------- --------
$501,315 $413,865 $216,471
======== ======== ========
LIABILITIES
Accrued expenses $ 700 $ 2,000
Interest payable to stockholder 16,623 $ 13,991 4,386
Demand loan payable to stockholder 131,590 131,590 87,590
-------- -------- --------
148,913 145,581 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; 4,459,200, 4,365,600 and
4,185,600 issued and outstanding, respectively 4,459 4,366 4,186
Additional paid-in capital 679,985 563,078 347,258
Stock subscription receivable (8,000)
Deficit accumulated during development stage (332,042) (299,160) (220,949)
-------- -------- --------
352,402 268,284 122,495
-------- -------- --------
$501,315 $413,865 $216,471
======== ======== ========
See notes to financial statements
F-3
</TABLE>
<PAGE>
BIG DOG ENTERTAINMENT INC.
(a development stage company)
<TABLE>
<CAPTION>
Statements of Operations
Period from Period from Period from
December 5, December 5, December 5,
1997 1997 1997
Three Months Three Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
December 31, December 31, December 31, September 30, September 30, September 30,
1999 1998 1999 1999 1998 1999
----------- ---------- ---------- ------------- ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Music sales $ 1,750 $ 20,750 $ 20,750 $ 20,750
---------- --------- --------- ----------
Operating costs:
Cost of music sales 829 11,141 11,141 11,141
General and administrative $ 30,250 10,814 200,028 78,215 $ 91,563 169,778
Noncash compensation expense 125,000 125,000 125,000
---------- ---------- --------- --------- ---------- ----------
Total costs and expenses 30,250 11,643 336,169 89,356 216,563 305,919
---------- ---------- --------- --------- ---------- ----------
Loss from operations (30,250) (9,893) (315,419) (68,606) (216,563) (285,169)
Interest expense to shareholder 2,632 1,933 16,623 9,605 4,386 13,991
---------- ---------- --------- --------- ---------- ----------
Net loss $ (32,882) $ (11,826) $(332,042) $ (78,211) $ (220,949) $ (299,160)
========== ========== ========= ========= ========== ==========
Net loss per share - basic and diluted $(.01) $.00 $(.02) $(.05)
===== ==== =====
Weighted average number of shares
outstanding -
basic and diluted 4,390,960 4,195,868 4,274,776 4,107,460
========== ========== ========= ==========
See notes to financial statements
F-4
</TABLE>
<PAGE>
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 December
1998 at $1.25 per share, net of
offering costs of $1,000 93,600 93 116,907
Net loss for the period (32,882)
--------- ------ -------- ------- ---------
Balance - December 31, 1999
(unaudited) 4,459,200 $4,459 $679,985 $ 0 $(332,042)
========= ====== ======== ======= =========
See notes to financial statements
F-5
</TABLE>
<PAGE>
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
Three Months Three Months (Inception) (Inception) (Inception)
Ended Ended Through Year Ended Through Through
December 31, December 31, December 31, September 30, September 30, September 30,
1999 1998 1999 1999 1998 1999
------------- ------------- ------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(32,882) $(11,826) $(332,042) $ (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 373 190 1,863 1,273 217 1,490
Amortization of record master 304 5,276 5,276 5,276
Changes in:
Inventory 525 (19,289) (14,019) (5,270) (19,289)
Other current assets (202) (1,227) (1,025) (1,025)
Other assets 8,000 (3,320) (8,600) (2,720) (11,320)
Accrued expenses and interest payable
to stockholder 3,332 (68) 17,323 7,605 6,386 13,991
-------- -------- --------- --------- --------- ---------
Net cash used in operating activities (21,379) (10,875) (206,416) (87,701) (97,336) (185,037)
-------- -------- --------- --------- --------- ---------
Cash flows from investing activities:
Film and record production costs (25,635) (250,020) (169,021) (80,999) (250,020)
Property, equipment and software (21,531) (2,724) (34,635) (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
-------- -------- --------- --------- --------- ---------
Net cash used in investing activities (21,531) (28,359) (334,655) (119,954) (193,170) (313,124)
-------- -------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of stock 116,000 26,000 558,444 224,000 218,444 442,444
Deferred offering costs (45,605) (64,574) (18,969) (18,969)
Amounts due to related party 14,000 131,590 44,000 87,590 131,590
-------- -------- --------- --------- --------- ---------
Net cash provided by financing
activities 70,395 40,000 625,460 249,031 306,034 555,065
-------- -------- --------- --------- --------- ---------
Net increase in cash 27,485 766 84,389 41,376 15,528 56,904
Cash - beginning of period 56,904 15,528 15,528
-------- -------- --------- --------- --------- ---------
Cash - end of period $ 84,389 $ 16,294 $ 84,389 $ 56,904 $ 15,528 $ 56,904
======== ======== ========= ========= ========= =========
Noncash financing activity:
Subscription receivable, paid in
January 2000 $ 1,000 $ 1,000
See notes to financial statements
F-6
</TABLE>
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
Note A - The Company and Basis of Preparation
Big Dog Entertainment, Inc. (the "Company"), a Delaware corporation, was
incorporated on December 5, 1997 under the name of Prelude Development, Inc. and
in July 1999 changed its name to Big Dog Entertainment, 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).
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.
Record production costs represent the costs of producing a record
master, including musical talent, equipment, studio facility and talent for
engineering, directing and mixing. 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.
[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.
F-7
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
Note B - Summary of Significant Accounting Policies (continued)
[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.
[8] Interim financial statements:
The financial statements as of December 31, 1999 and for the three-month
periods ended December 31, 1999 and 1998 and for the period from December 5,
1997 (inception) through December 31, 1999 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.
F-8
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development stage comapny)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
Note C - Film and Record Production Costs
Film and record production costs are summarized as follows:
<TABLE>
<CAPTION>
Movie Record
Production Master Total
---------- ------ -----
<S> <C> <C> <C>
In process - balance at September 30, 1998 $ 42,842 $ 38,157 $ 80,999
======== ======== ========
Released $ 87,930 $ 87,930
Accumulated amortization (5,276) (5,276)
-------- --------
82,654 82,654
In process $125,895 36,195 162,090
-------- -------- --------
Balance at September 30, 1999 and
December 31, 1999 $125,895 $118,849 $244,744
======== ======== ========
</TABLE>
The Company expects that it will amortize over 80% of its remaining film and
record production costs during the three- year period ending September 30, 2002.
Note D - Property, Equipment and Software
Property, equipment and software are summarized as follows:
<TABLE>
<CAPTION>
Three Months
Ended
December 31, September 30,
1999 1999 1998
----------- ---- ----
<S> <C> <C> <C>
Equipment $11,027 $ 9,496 $2,171
Website 22,109 2,109
Furniture and fixture 1,499 1,499
------- ------- ------
34,635 13,104 2,171
Less accumulated depreciation 1,863 1,490 217
------- ------- ------
$32,772 $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 shareholder (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.
F-9
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
Note E - Amounts Due From/to Related Parties (continued)
During fiscal 1998, the Company advanced $50,000 to a company controlled by then
founding shareholder, $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 shareholder 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.
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 a capital contribution and
compensation expense 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 December 31, 1999 and September 30, 1999 and 1998, the Company had available
federal net operating loss carryforwards to reduce future taxable income of
approximately $332,000, $299,000 and $221,000, respectively. The net operating
loss carryforwards expire in 2018 and 2019. 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.
At December 31, 1999 and September 30, 1999 and 1998, the Company has a deferred
tax asset of approximately $133,000, $120,000 and $88,000, respectively,
representing the benefits of its net operating loss carryforwards. 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 $13,000 during the period October 1, 1999 through
December 31, 1999 has been provided to offset the deferred tax assets.
F-10
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
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, $4,537 and $4,825 for the years ended
September 30, 1999 and 1998 and the three months ended December 31, 1999 and
1998, 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 December 31, 1999, 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.
Note I - Business Segment Information
The Company adopted the provisions of SFAS No. 131, "Disclosures and 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
F-11
<PAGE>
BIG DOG ENTERTAINMENT, INC.
(a development stage company)
Notes to Financial Statements
September 30, 1999 and 1998
(unaudited with respect to December 31, 1999
and the three-month period ended
December 31, 1999 and 1998)
Note I - Business Segment Information (continued)
based onhow management internally evaluates separate financial information,
business activities and management responsibility. The Company's operations (see
Note A) constitute two reportable segments, 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
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
Three months ended December 31,1999:
Revenues 0
Operating income (loss) (30,250) (30,250)
Depreciation and amortization 373 373
Identifiable assets 125,895 118,849 256,571 501,315
Capital expenditure 21,531 21,531
Film and record production costs 0
Three months ended December 31,1998:
Revenues 1,750 1,750
Operating income (loss) 921 (10,814) (9,893)
Depreciation and amortization 304 190 494
Identifiable assets 45,842 60,792 134,623 241,257
Capital expenditure 2,724 2,724
Film and record production costs 22,635 25,635
</TABLE>
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 December 31, 1999, respectively, amount to $18,969 and $64,574. The
Company is obligated to pay a fee to the underwriter of $25,000 if it decides
not to pursue the public offering.
F-12
<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
Cautionary Note Regarding Forward-
Looking Statements. . . . . . . . 4
Summary Financial Data . . . . . . . 5
Risk Factors.. . . . . . . . . . . . 6
Use of Proceeds. . . . . . . . . . . 14
Dividend Policy. . . . . . . . . . . 15
Capitalization.. . . . . . . . . . . 16
Dilution.. . . . . . . . . . . . . . 17
Selected Financial Information.. . . 18
Plan of Operation. . . . . . . . . . 19
Business.. . . . . . . . . . . . . . 22
Management.. . . . . . . . . . . . . 32
Certain Transactions.. . . . . . . . 37
Description of Securities. . . . . . 39
Shares Eligible for Future Sale. . . 40
Underwriting.. . . . . . . . . . . . 42
Legal Matters. . . . . . . . . . . . 44
Experts. . . . . . . . . . . . . . . 44
How to Get More Information. . . . . 44
Financial Statements.. . . . . . . . F-1
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>
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.
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 Big Dog 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
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
- ---------
*To be filed by amendment
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant 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.
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
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether 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 this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in Ronkonkoma, New York on the 26th day of April,
2000.
BIG DOG 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 April
26, 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
<PAGE>
EXHIBIT INDEX
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
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
- ----------
* To be filed by amendment
CERTIFICATE OF INCORPORATION
OF
PRELUDE DEVELOPMENT INC.
I, the undersigned, in order to form a corporation from the purpose
hereinafter stated, under and pursuant to the provisions of the General
Corporation law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is:
PRELUDE DEVELOPMENT INC.
SECOND: The registered office of the corporation and place of business in
the State of Delaware is to be located at 15 E. North Street, in the City of
Dover, County of Kent. The name of the registered agent at that address is
Corporate Services Bureau Inc.
THIRD: The nature of the business, and the objects and purposes proposed to
be transacted, promoted, and carried on, are to do any and all things therein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:
To do any lawful act or thing for which corporation may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the corporation is authorized to
issue is 20,000,000 par value $.001.
FIFTH: The name and address of the incorporator is as follows:
NAME ADDRESS
---- -------
Jody V. Crowley 283 Washington Avenue
Albany, New York 12206
SIXTH: The powers of the incorporator are to terminate upon the filing of
the Certificate of Incorporation, and the name(s) and mailing address(es) of the
person(s) who is (are) to serve as Director(s) until the first annual meeting of
stockholders or until their successors are elected and qualify is (are) as
follows:
NAME ADDRESS
---- -------
Marlowe R. Walker, Jr. 26 Woodbury Rd.
Hauppauge, NY 11786
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/09/1997
971419676 - 2830697
<PAGE>
SEVENTH; The Directors shall have power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchises of this corporation.
With the consent in writing, and pursuant to a vote of the holders of a
majority of the capital stock issued and outstanding, the Directors shall have
authority to dispose, in any manner, of the whole property of the corporation.
The By-Laws shall determine whether and to what extent the accounts and
books of this Corporation, or any of them, shall be open to the inspection of
the stock holders; and no stock holder shall have any right of inspecting and
account, or book, or document of this Corporation except as conferred by Law of
the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings and
keep the books, documents and papers of the corporation outside the State of
Delaware, at such places as may be from time to time designated by the By-Laws
or by resolution of the stockholders or directors, except as otherwise required
by the Laws of the State of Delaware.
It is the intention that the objects, purposes and powers specified in the
third paragraph hereof shall, except where otherwise specified in said
paragraph, be in nowise limited or restricted by reference to or inference from
the terms of any other clause or paragraph in the Certificate of Incorporation,
but that the objects, purposes and powers specified in the third paragraph and
in each of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes, and powers.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 5th day of
December, 1997.
/s/ Jody V. Crowley
- -----------------------------
Jody V. Crowley, Incorporator
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/20/1999
991302421 - 2830692
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
PRELUDE DEVELOPMENT INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: that at a meeting of the Board of Directors of PRELUDE DEVELOPMENT
INC. resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of this corporation is
amended by changing the Article thereof numbered "FIRST" so that, as
amended, said Article shall be and read as follows:
BIG DOG ENTERTAINMENT INC.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said PRELUDE DEVELOPMENT INC. has caused this
certificate to be signed by Marlowe R. Walker, an Authorized Officer, this 14
day of July, 1999.
By: /s/ Marlowe R. Walker
------------------------------
Authorized Officer
Name: Marlowe R. Walker
------------------------------
Print or Type
Title: President
------------------------------
<PAGE>
Page 1
State of Delaware
Office of the Secretary State
-----------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF AMENDMENT OF "BIG DOG ENTERTAINMENT INC.", FILED IN THIS
OFFICE ON THE TWENTY-SEVENTH DAY OF DECEMBER, A.D. 1999, AT 10:30 O'CLOCK
A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FOWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2830692 8100 [SEAL] AUTHENTICATION: 0177537
991562415 DATE: 01-04-00
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION OF
BIG DOG ENTERTAINMENT INC.
--------------------------
BIG DOG ENTERTAINMENT INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors, Inc. of BIG DOG
ENTERTAINMENT INC, resolutions were adopted setting forth a proposed amendment
to the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of the
corporation for consideration thereof.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the Annual Meeting of Stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the following amendment:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing Article FOURTH of the Company's Certificate of
Incorporation, so that, as amended said Article shall be and read as
follows:
"FOURTH: The total number of shares of all classes of stock
which the corporation shall have authority to issue is 26,000,000
shares. Of these (i) 25,000,000 shares shall be shares of Common
Stock of the par value of $.001 per share; and (ii) 1,000,000
shares shall be shares of Preferred Stock of the par value of
$.001 per share.
Subject to the rights of any holders of Preferred Stock, the
Common Stock shall be entitled to dividends out of funds legally
available therefor, when, as and if declared and paid to the
holders of Common Stock, and upon liquidation, dissolution or
winding up of the Corporation, to share ratably in the assets of
the Corporation available for distribution to the holders of
Common Stock. Except as otherwise provided herein or by law, the
holders of the Common Stock shall have full voting rights and
powers, and each share of Common Stock shall be entitled to one
vote.
<PAGE>
The Preferred Stock may be issued from time to time in
classes or series and shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions of the
Board of Directors providing for the issuance of such stock."
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said BIG DOG ENTERTAINMENT INC. has caused this
certificate to be signed by MARLOWE R. WALKER, its President this 23rd day of
December, 1999.
BIG DOG ENTERTAINMENT INC.
By: /s/ Marlowe R. Walker
----------------------------------------
Marlowe R. Walker, President
BY-LAWS
of
BIG DOG ENTERTAINMENT INC.
--------------------------
ARTICLE I - OFFICES
-------------------
SECTION 1. REGISTERED OFFICE. The registered office shall be established
and maintained at 15 E. North Street, in the City of Dover in the County of
Kent, in the State of Delaware.
SECTION 2. OTHER OFFICES. The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II - MEETING OF STOCKHOLDERS
------------------------------------
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
may transact such other corporate business as shall be stated in the notice of
the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the
terms and provisions of the Certificate of Incorporation and these By-Laws shall
be entitled to one vote, in person or by proxy, for each share of stock entitled
to vote held by such stockholder, but no proxy shall be voted after three years
from its date unless such proxy provides for a longer period. Upon the demand of
any stockholder, the vote for directors and upon any question before the meeting
shall be by ballot. All elections for directors shall be decided by plurality
vote; all other questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the laws of the State of
Delaware.
<PAGE>
SECTION 4. STOCKHOLDER LIST. The officer who has charge of the stock ledger
of the corporation shall at least 10 days before each meeting of stockholders
prepare a complete alphabetical addressed list of the stockholders entitled to
vote at the ensuing election, with the number of shares held by each. Said list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall be
available for inspection at the meeting.
SECTION 5. QUORUM. Except as otherwise required by law, by the Certificate
of Incorporation or by these By-Laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of stock entitled to vote shall be
present. At any such adjourned meeting at which the requisite amount of stock
entitled to vote shall be represented, any business may be transacted which
might have been transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
SECTION 6. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the directors
or stockholders entitled to vote. Such request shall state the purpose of the
proposed meeting.
SECTION 7. NOTICE OF MEETINGS. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than fifty
days before the date of the meeting.
SECTION 8. BUSINESS TRANSACTED. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
SECTION 9. ACTION WITHOUT MEETING. Except as otherwise provided by the
Certificate of Incorporation, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provisions of the statutes or the Certificate of Incorporation or
of these By-Laws, the meeting and vote of stockholders may be dispensed with, if
all the stockholders who would have been entitled by vote upon the action if
such meeting were held, shall consent in writing to such corporate action being
taken.
<PAGE>
ARTICLE III - DIRECTORS
-----------------------
SECTION 1. NUMBER AND TERM. The number of directors shall be 5. The
directors shall be elected at the annual meeting of the stockholders and each
director shall be elected to serve until his successor shall be elected and
shall qualify. The number of directors may not be less than three except that
where all the shares of the corporation are owned beneficially and of record by
either one or two stockholders, the number of directors may be less than three
but not less than the number of stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a committee
or other officer becomes vacant, the remaining directors in office, though less
than a quorum by a majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until his successor
shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a majority
of all the shares of stock outstanding and entitled to vote, at a special
meeting of the stockholders called for the purpose and the vacancies thus
created may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER. The number of directors may be increased by
amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. COMPENSATION. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution of
the board a fixed fee and expenses of attendance may be allowed for attendance
at each meeting. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer, agent
or otherwise, and receiving compensation therefor.
SECTION 7. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the board, or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the board or
committee.
<PAGE>
ARTICLE IV - OFFICERS
---------------------
SECTION 1. OFFICERS. The officers of the corporation shall consist of a
President, a Treasurer, and a Secretary, and shall be elected by the Board of
Directors and shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as it
may deem proper. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such officers and agents as it may deem advisable, who shall hold their offices
for such terms and shall exercise such power and perform such duties as shall be
determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer of
the corporation and shall have the general powers and duties of supervision and
management usually vested in the office of President of a corporation. He shall
preside at all meetings of the stockholders if present thereat, and in the
absence or non-election of the Chairman of the Board of Directors, at all
meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the Board of
Directors shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages, and other contracts on behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it and when so
affixed the seal shall be attested by the signature of the Secretary of the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. Each Vice-President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, or the President, taking proper vouchers for such
disbursements. He shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever they may request it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
<PAGE>
SECTION 7. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By- Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the corporation and of directors in a book to be
kept for that purpose. He shall keep in safe custody the seal of the
corporation, and when authorized by the Board of Directors, affix the same to
any instrument requiring it, and when so affixed, it shall be attested by his
signature or by the signature of any assistant secretary.
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
---------
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the chairman or vice-chairman of the Board of Directors, or the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary of the corporation, certifying the number of shares owned by him
in the corporation. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the designation,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issued to represent such class of series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Where a certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a registrar
other than the corporation or its employee, the signatures of such officers may
be facsimiles.
SECTION 2. LOST CERTIFICATES. New certificates of stock may be issued in
the place of any certificate therefore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against it on
account of the alleged loss of any such new certificate.
<PAGE>
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation shall
be transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to such
other persons as the directors may designate, by who they shall be cancelled,
and new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the day of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividends there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts, or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by the officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
<PAGE>
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by
these By-Laws to be given, personal notice is not meant unless expressly stated,
and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage prepaid, addressed to the
person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed proper notice.
ARTICLE VI - CLOSE CORPORATIONS: MANAGEMENT BY SHAREHOLDERS
-----------------------------------------------------------
If the Certificate of Incorporation of the corporation states that the
business and affairs of the corporation shall be managed by the shareholders of
the corporation rather than by a Board of Directors, then, whenever the context
so requires the shareholders of the corporation shall be deemed the directors of
the corporation for purposes of applying any provision of these By- Laws.
ARTICLE VII - AMENDMENTS
------------------------
These By-Laws may be altered and repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
thereof is contained in the notice of such special meeting by the affirmative
vote of a majority of the stock issued and outstanding or entitled to vote
thereat, or by the regular meeting of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice thereof is contained in the notice of such special meeting.
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 17, 1999 (with respect to Note E, January 3,
2000 and with respect to Note F, February 16, 2000) in the Registration
Statement on Form SB-2 of Big Dog Entertainment, Inc.
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
April 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed financial statements for the three month period ended
December 31, 1999 and twelve month period ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-END> DEC-31-1999 SEP-30-1999
<CASH> 84,389 56,904
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 19,289 19,289
<CURRENT-ASSETS> 155,905 127,218
<PP&E> 34,635 13,104
<DEPRECIATION> 1,863 1,490
<TOTAL-ASSETS> 501,315 413,865
<CURRENT-LIABILITIES> 148,913 145,581
<BONDS> 0 0
0 0
0 0
<COMMON> 4,459 4,436
<OTHER-SE> 347,943 263,918
<TOTAL-LIABILITY-AND-EQUITY> 501,315 413,865
<SALES> 0 20,750
<TOTAL-REVENUES> 0 0
<CGS> 0 11,141
<TOTAL-COSTS> 30,250 89,356
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,632 9,605
<INCOME-PRETAX> (32,882) (78,211)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (32,882) (78,211)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (32,882) (78,211)
<EPS-BASIC> (.01) (.02)
<EPS-DILUTED> (.01) (.02)
</TABLE>