As filed with the Securities and Exchange Commission on December __, 2000
Registration No. 333-40444
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BODYGUARD RECORDS.COM, INC.
--------------------------
(Name of small business issuer in its charter)
Delaware 13-4087440
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(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification)
incorporation or
Organization)
138 Fulton Street, New York, NY 10038 (732) 888-4646
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(Address of principal executive offices) Telephone Number
John Rollo
138 Fulton Street
New York, NY 10038
(212) 571-2179
(Name, address and phone number for agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If 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 effective registration statement
for the same offering [ ]
If 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 Proposed Maximum Proposed Maximum
Of Securities To Amount To Be Offering Price Per Aggregate Offering Amount of e
Be Registered Registered Share(1) Price(1) Registration Fee
------------ ---------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Common Stock $1,000,000 400,000 Shares $2.50 $278.00
</TABLE>
Note (1) Estimated solely for calculating the registration fee
<PAGE>
SUBJECT TO COMPLETION, DATED ________, 2001
Preliminary Prospectus
BODYGUARD RECORDS.COM, INC.
(logo)
This is our initial public offering of up to 400,000 shares of our common
stock.
We will be selling a minimum of 100,000 and a maximum of 400,000 of our shares
in this offering at $2.50 per share. Until we have sold at least 100,000 shares,
we will not disburse the funds. We will deposit all proceeds of this offering
into a non-interest bearing escrow account with Continental Stock Transfer &
Trust Company in New York City. If we are unable to sell at least 100,000 shares
within 90 days, we will promptly return all funds, without interest or
deductions to subscribers within 30 days. The offering will remain open until
all shares offered are sold or nine months after the date of this prospectus,
except that we will have only 90 days to sell at least the first 100,000 shares.
We may decide to cease selling efforts prior to such date.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
As indicated in "Risk Factors" on page___, these shares involve a high degree of
risk.
--------------------------------------------------------------------------------
Number of Price to Proceeds
Shares Public(1) Discount (2) to Us (3)
--------------------------------------------------------------------------------
Per Share $ 2.50 $ .25 $ 2.25
Minimum 100,000 $ 2.50 $ 25,000 $ 175,000
Maximum 400,000 $ 2.50 $ 100,000 $ 850,000
1. The price we will sell our common stock.
2. The commission we will pay to licensed broker/dealer for selling our common
stock.
3. The funds we will retain after paying the commission to licensed
broker/dealers, in addition to estimated $50,000 offering expense.
The date of this prospectus is ______, 2001
BODYGUARD RECORDS.COM, INC.
138 Fulton Street
New York, NY 10038
<PAGE>
Table of contents
Item Page
Prospectus Summary *
Summary Financial Information
Risk Factors
Forward Looking Statements
Business
Use of Proceeds
Management
Principal Shareholders
Dilution
Subscription and Plan of Distribution
Shares Eligible for Future Sale
Description of Securities
Certain Transactions
Legal Matters
Experts
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligation
Until , 2001 (90 days after the commencement of this offering), all dealers
effecting transactions in the these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters to
their unsold allotments or subscriptions.
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Summary
This summary highlights information we present more fully elsewhere in this
prospectus. You should read this entire prospectus carefully.
About Us
We are a development stage entertainment company without an operating history,
having only been incorporated on November 11, 1999. Our objective is to become
an innovative Internet record company that will primarily utilize the Internet
and other emerging technologies such as Mp3 to successfully promote and market
our signed recording artists. We intend to allow visitors to our proposed
website to have access to a variety of styles of music, a database of a number
of artists, with links to the artist's homepage and biographical information. We
intend to offer visitors to our website the opportunity to order CD's via our
mail order department, or via digital download directly to their computer from
Mac Milli Entertainment, a company we contracted with do this for us to provide
downloading and processing credit card transactions at a reasonable cost.
So far, we have signed artist recording agreements with five new artists. They
are Naked Underneath, a two man Pop/Rock group; Summer Snowmen, a four man
Pop/Rock group; June a four man a Pop/Rock group; Love Saves The Day, featuring
Dean Davidson, a five man Pop/Rock group; and Dennis DeCambre a R&B/Rap solo
artist. Three of our artists have recorded a CD, a sample of which you can
listen to on our website together with a brief description of their background.
June and Love Saves The Day, our two newest groups, are scheduled to begin
recording their CD's in December and February, respectively.
Corporate Information
We were incorporated under the laws of the State of Delaware on November 11,
1999. Our principal executive offices are located at 138 Fulton Street, New
York, New York 10038. Our telephone number at that address is (212) 571-2179.
Our corporate website is located at www.bodyguardrecords.com. We do not intend
for information found on our website to be part of this prospectus.
We do not presently have any protected trademarks or service marks.
This Offering
Securities offered A minimum of 100,000 and a maximum of 400,000 shares
of common stock, $.001 par value
Price per Share $2.50
Common stock outstanding 900,000 shares
prior to the offering
Common stock to be
outstanding after the
minimum offering 1,000,000 shares
Common stock to be
outstanding after the
maximum offering 1,300,000 shares
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Use of Proceeds
We intend to use the proceeds of this offering for the purposes and in the
order set forth as follows:
* Marketing of our Web sites
* Purchase of computer equipment
* Web site development
* General and administrative expenses
* Manufacturing of CD's and merchandise
* Hiring new employees
* Working capital
Risk factors
An investment in the common stock of Bodyguard involves a high degree of risk.
Investors could lose their entire investment. Prospective investors should
carefully consider the following factors, along with the other information set
forth in this prospectus, in evaluating Bodyguard, its business and prospects
before purchasing the common stock.
Risks related to our business
It is difficult to evaluate our business and prospects because we have a limited
operating history.
We were formed in November 1999, signed our first recording artist in
December 1999, and did not launch our website until January 17, 2000. Our short
operating history, coupled with the limited number of new recording artists we
have signed, their relative obscurity and our lack of working capital, makes it
difficult to evaluate our current business and prospects or to accurately
predict our future revenue or results of operations. Our revenue and income
potential continue to be unproven, and our business model is evolving. Because
both the Internet and musical taste are constantly changing, especially among
young people, we may need to modify our business model to adapt to these
changes. Before deciding to invest in our securities, you should evaluate the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in early stages of development, particularly companies seeking to
exploit a new and rapidly evolving Internet industry segment.
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Our business model is new and unproven, and we may not be able to generate
sufficient revenue to operate our business successfully.
Our model for conducting business and generating revenue is new and
unproven. Our success will depend primarily on our ability to generate revenue
from multiple sources, including:
* online and retail sales of music and related merchandise;
* sales of advertising and sponsorships;
* marketing our database of consumer information and preferences; and
* sales of, or subscription fees for, digitally distributed music.
It is uncertain whether a music-related web site that relies on attracting
people to learn about, listen to and purchase CD's and related merchandise can
generate sufficient revenue from electronic commerce, advertising, sales of
database information and sales of, or fees for, digital downloads of music, to
become a viable business. We provide several of our services without charge, and
we may not be able to generate sufficient revenue to pay for these services.
Accordingly, we are not certain that our business model will be successful or
that we can sustain revenue growth or be profitable. If our markets develop more
slowly than expected or become saturated with competitors, or our CD's and
services do not achieve or sustain market acceptance, we may not be able to
successfully operate our business.
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We have a history of operating losses and anticipate losses and negative cash
flow for the foreseeable future.
For the period from inception to March 31, 2000 (our year end) and the six
months ended September 30, 2000, we had net losses of $129,782 and $81,622,
respectively. We have never had any revenue from operations. As of September 30,
2000, we had total assets of only $16,696 and a shareholders' deficit of
$(29,804). We expect our losses and negative cash flow to continue for the
foreseeable future. We anticipate that our losses will increase significantly
from current levels because we plan to significantly increase our expenditures
for sales and marketing, content development, and technology and infrastructure
development. With increased expenses, we will need to generate significant
revenue to achieve profitability. Consequently, it is possible that we may never
achieve profitability, and even if we do achieve profitability, we may not
sustain or increase profitability on a quarterly or annual basis in the future.
If we do not achieve or sustain profitability in the future, then we will be
unable to continue our operations and may be required to file for Federal
bankruptcy protection.
Our operating results may prove unpredictable.
Our operating results are likely to fluctuate significantly in the future
due to a variety of factors, many of which are outside of our control. Because
our operating results are volatile and difficult to predict, in some future
quarters our operating results may fall below the expectations of securities
analysts and investors. In this event, the trading price of our common stock may
fall significantly.
Conflict of interest - management's fiduciary duties.
Our three executive officers and directors, two of whom are also our
principal stockholders, are also executive officers, directors and principal
stockholders of Cream Records, Inc., that changed its name to Hardrive
Records.com, Inc., a potentially competitive Internet music company that until
November 2000, operated out of the same offices as we do, which intended to
release its music products via the Internet and which has discontinued
operations. Although, these three men have agreed to devote 70% of their full
time to our business, and disavow that Hardrive competed with us, they have
nevertheless entered into written employment agreements with Hardrive, and until
November 2000 were actively pursuing Hardrive's business. Accordingly, and
although Hardrive apparently ceased business activities in November 2000, and
sold its artists recording and other rights, it is entirely foreseeable that a
conflict may arise between their duties to us as a director and officer and
their duties as a director and officer of Hardrive. Since we will be dependent
upon Messrs. Foley and Rollo for the foreseeable future, the existence of these
conflict of interest during this period may present a distraction and may
diminish our chances to achieve profitable operations.
The loss of key personnel or the inability to hire or retain qualified personnel
could adversely affect our business.
Our operation are dependent on continued efforts of John Rollo, our
president and Gene Foley, our chief executive officer. If either of these
persons becomes unable or unwilling to continue in his role with Bodyguard, or
if we are unable to attract, motivate and retain other qualified employees, our
business and prospects could be adversely
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affected. Competition for such personnel in the record industries is intense.
The loss of key personnel or the inability to hire or retain qualified personnel
could have a material adverse effect on our business.
Future sales of our common stock could cause our stock to decline in price.
All shares registered in this offering will be freely tradable upon
effectiveness of this registration statement. The sale of a significant amount
of shares registered in this offering at any given time could cause the trading
price of our common stock to decline and to be highly volatile.
Volatile stock price may lead to losses by investors and to securities
litigation
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. This price may vary from the market price of the
common stock after the offering. The stock market has experienced significant
price and volume fluctuations and the market prices of Internet -related
companies, have been highly volatile. Investors may not be able to resell their
shares at or above the initial public offering price.
In the past, securities class action litigation has often been instituted
against a company following periods of volatility in the company's stock price.
This type of litigation could result in substantial costs and could divert our
management's attention and resources.
Bodyguard may continue to be unprofitable.
We were only recently organized and we have a limited operating history and
must be considered in the development stage. Our operations will be subject to
all the risks inherent in the establishment of a developing enterprise and the
uncertainties arising from the absence of a significant operating history. We
may continue to be unprofitable, even with the proceeds from this offering. For
the period from inception to March 31, 2000, our year end, and the six months
ended September 30, 2000, we had net losses of $129,782 and $81,622,
respectively. We have never had any revenue from operations. As of September 30,
2000, we had total assets of only $16,696 and a shareholders' deficit of
$(29,804). We continue to experience losses and we depend upon the
implementation of our business plan and the proceeds from at least the sale of
the minimum number of shares in this offering to continue our business. Even if
we are able to fully implement our business plan and sell all of the offered
shares, there is no guarantee that we will become profitable. The inability to
become profitable may result in our being required to file for protection under
the federal bankruptcy laws.
Because we are not engaging underwriters there will be less due diligence than
in an underwritten deal and we are less likely to sell the shares we are
offering. Because we are not engaging an underwriter in connection with this
offering, there will be less likelihood that we will sell the minimum number of
shares offered or that we will reach the maximum number of shares. In addition,
there will not be a broker-dealer to perform the due diligence that is generally
performed in an underwritten offering.
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Development of markets required for successful performance by Bodyguard.
We only have limited marketing activity and there can be no assurance that
our marketing program, when further developed and employed, will be successful.
Our financial performance will depend, in part, on market acceptance of our
music products which will require substantial marketing efforts and expenditures
of significant funds.
You will incur immediate and substantial dilution if the options described below
are exercised.
After this offering, we will have approximately 18,700,000 shares of common
stock authorized but unissued and not reserved for specific purposes, including
an aggregate of 150,000 shares of common stock unissued but reserved for
issuance under our option plan. All of these shares may be issued without any
action or approval by our stockholders. Any issuance of these additional shares
of common stock would further dilute the percentage ownership of Bodyguard held
by the investors in this offering.
We will not pay a cash dividend in the near future.
Bodyguard has never declared or paid any cash dividends. Bodyguard
currently does not intend to pay cash dividends in the foreseeable future on the
shares of common stock. In the event we are fortunate enough to reach
profitability, we intends to reinvest any earnings in the development and
expansion of Bodyguard's business. Accordingly, no investor should invest in
this offering based upon the expectation of dividends. Any cash dividends in the
future to common stockholders will be payable when, as and if declared by the
board of directors of Bodyguard, in its discretion. Therefore, there can be no
assurance that any dividends on the common stock will ever be paid.
We have no public market for our stock and there is no assurance one will
develop; you may have difficulty liquidating your investment.
There is no public market for our shares of common stock. Although we
intend to apply for listing on the OTC Bulletin Board as soon as we meet listing
requirements, there is no assurance that we will be granted a listing. If we are
granted a listing, there is no assurance that a market for our common shares
will develop. If a market develops, there can be no assurance that the price of
our shares in the market will be equal to or greater than the price per share
investors pay in this offering; in fact, the price of our shares in any market
that may develop could be significantly lower. Investors in this offering may
have difficulty liquidating their investment.
Forward-looking statements; market data
Many statements made in this prospectus under the captions Summary, Risk
factors, Management's discussion and analysis of financial condition and results
of operations, Business and elsewhere are forward-looking statements that are
not based on historical facts. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed
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or implied by these forward-looking statements, including those discussed here
under risk factors.
This prospectus contains market data related to our business and the
Internet. This market data includes projections that are based on a number of
assumptions. The assumptions include that:
* no catastrophic failure of the Internet will occur;
* the number of people online and the total number of hours spent online
will increase significantly over the next five years;
* the value of online advertising dollars spent per online user hour
will increase;
* the download speed of content will increase dramatically; and
* Internet security and privacy concerns will be adequately addressed.
If any one or more of these assumptions turns out to be incorrect, actual
results may differ from the projections based on these assumptions. The
Internet-related markets may not grow over the next three to four years at the
rates projected by these market data, or at all. The failure of these markets to
grow at these projected rates may have a material adverse effect on our
business, results of operations and financial condition, and the market price of
our common stock.
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
If we do not initiate advertising revenue, our business will be adversely
affected.
If we do not start to generate advertising revenue, our business will be
adversely affected. The commencement of advertising revenue depends upon many
factors, including our ability to:
* respond to and anticipate fluctuations in the demand for, and pricing
of, online advertising;
* conduct successful selling and marketing efforts aimed at advertisers;
* increase the size of our audience and the amount of time that our
audience spends on our Web sites;
* initiate a direct advertising sales force and build a marketing team;
* aggregate our target demographic group of 12 to 34 year-old active
music consumers;
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* offer advertisers the means to effectively target their advertisements
to our audience;
* accurately measure the size and demographic characteristics of our
audience;
* initiate key advertising relationships; and
* compete for advertisers with Internet and traditional media companies.
Our failure to achieve one or more of these objectives could impair our
ability to initiate advertising revenue, which could adversely affect our
business. In addition to the above factors, general economic conditions, as well
as economic conditions specific to online advertising, electronic commerce and
the music industry, could affect our ability to initiate and then increase our
advertising revenue. In particular, the growth of online advertising has
recently decreased, which has adversely affected revenue from online
advertising.
If we do not generate revenue from online CD sales, our growth will be limited
and our business will be adversely affected.
If we do not start to generate revenue from sales of CD's and related music
merchandise, our growth will be limited and our business will be adversely
affected. To generate significant online revenue, we will have to offer music
and related merchandise that appeal to a large number of online consumers,
particularly young people. We also will have to continue to create online
communities that are conducive to electronic commerce, build or license a
sufficiently robust and scalable electronic commerce platform and develop an
order fulfillment capability. Since our target market includes Internet users
below the age of 18, and these users have limited access to credit cards, our
ability to capture online product revenue from this group may be limited. If we
are not successful in meeting these challenges, our growth will be limited and
our business will be adversely affected.
The effectiveness of the Internet for advertising is unproven, which may
discourage some advertisers from advertising on our sites.
Our future depends in part on an increase in the use of the Internet and
other forms of digital media for advertising. The Internet advertising market is
new and rapidly evolving, and we cannot yet gauge the effectiveness of
advertising on the Internet as compared to traditional media. As a result,
demand for Internet advertising is uncertain. Many advertisers have little or no
experience using the Internet for advertising purposes. The adoption of Internet
advertising, particularly by companies that have historically relied upon
traditional media for advertising, requires the acceptance of a new way of
conducting business, exchanging information and advertising products and
services. Such customers may find advertising on the Internet to be undesirable
or less effective than traditional advertising media for promoting their
products and services. For example, we believe that the recent growth of online
advertising revenue has been less than was generally expected. If the Internet
advertising market fails to fully develop or develops
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more slowly than we expect, our business could be adversely affected. In
addition, the market for advertising on other forms of digital media, such as
broadband distribution, is even less developed than Internet advertising, and if
that market does not develop, our growth may be limited.
We intend to depend upon artists to attract advertisers and generate electronic
commerce revenue.
We believe that our future success depends on our ability to maintain our
existing artist agreements and to secure additional agreements with artists. Our
business would be adversely affected by any of the following:
* inability to recruit new artists;
* the inability of our existing artists to achieve popularity ;
* increased competition to maintain existing relationships with artists;
* non-renewals of our current agreements with artists; and
* poor performance or negative publicity of our artists.
If we are not able to provide valuable services or incentives to artists,
or if we otherwise fail to maintain good relations with our artists, they may
lose interest in renewing their artists agreements with us or look to get out
from their agreements with us. All three of our current artist contracts have a
term of term of one record album of a minimum of ten songs and grant to us
options for between two and four additional record albums. If we fail to meet
these obligations, we may not be able to sign our artists to another agreement;
and we may be unable to recoup our costs to develop, operate and promote our web
sites.
In the past, we have not offered our artists options to purchase our common
stock. However, and if we become a publicly owned company as a result of this
offering, of which there can be no assurance, we may find it necessary to make
such offers in the future. In the event we become publicly owned but the market
price of our stock languishes at low levels or under performs, we may not be
able to offer artists options or other equity incentives on attractive enough
terms. If we cannot provide adequate incentives, our efforts to sign new artists
may be impaired. If we cannot maintain our current relationships with artists or
sign agreements with new artists, our user base would likely diminish and our
ability to generate revenues from electronic commerce and advertising would be
seriously harmed.
We may not be able to develop or obtain sufficiently compelling content to
attract and retain our target audience.
For our business to be successful, we must provide content and services
that attract consumers who will purchase our CD's and related merchandise
online. We may not be able to provide consumers with an acceptable mix of
products, services, information and
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community to attract them to our web sites frequently or to encourage them to
remain on our web sites for an extended period of time. If our audience
determines that our content does not reflect its tastes, then our audience size
could decrease or the demographic characteristics of our audience could change
and we may be unable to react to those changes effectively or in a timely
manner. Any of these results would adversely affect our ability to attract
advertisers and sell music and other related merchandise. Our ability to provide
compelling content could be impaired by any of the following:
* reduced access to content controlled by record labels, music
publishers and artists;
* diminished technical expertise and creativity of our production staff;
and
* inability to anticipate and capitalize on trends in music.
Our market is highly competitive and we may not be able to compete successfully
against our current and future competitors.
The market for the online promotion and distribution of CD's and related
merchandise is highly competitive and rapidly changing. We estimate that there
are currently over 150 web sites that promote and distribute music and related
merchandise. The number of web sites competing for the attention and spending of
consumers, advertisers and users has increased, and we expect it to continue to
increase because there are few barriers to entry to Internet commerce.
We face competitive pressures from numerous actual and potential
competitors. Our competitors include MP3.com, Launch Media, Amazon.com, Cdnow,
CheckOut.com, MTVi, major Internet portals and traditional music companies.
Competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. Some of our competitors
have announced agreements to work together to offer music over the Internet, and
we may face increased competitive pressures as a result. Many of our current and
potential competitors in the Internet and music entertainment businesses may
have substantial competitive advantages relative to us, including:
* longer operating histories;
* significantly greater financial, technical and marketing resources;
* greater brand name recognition;
* a large and existing customer base; and
* more popular content and artists.
These competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and devote greater resources
to develop, promote and sell their products or services than we can. web sites
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maintained by our existing and potential competitors may be perceived by
consumers, artists, talent management companies and other music-related vendors
or advertisers as being superior to ours. In addition, increased competition
could result in reduced advertising rates and margins and loss of market share,
any of which could harm our business.
We will be dependent upon a limited number of suppliers for CD's, music
merchandise, fulfillment and distribution; if we cannot secure alternate
suppliers, our business may be harmed.
We are completely reliant upon the timely action and distribution by third
parties. We currently rely on one vendor, Artist Development Associates to press
and deliver all of our CD's. We have no written agreement with Artist
Development . Consequently, we are at Artist Development's will as to the
acceptance and performance of our purchase orders. We currently rely upon Mac
Money Productions for the digital mastering of all of our CD's. We have no
written agreement with Mac Money. Consequently, we are at Mac Money's will as to
the acceptance and performance of our purchase orders. We are similarly
dependent upon Mac Milli Entertainment and Cyberretail.com, LLC for the
distribution and fulfillment of orders for the purchase of our CD's. Our
business could be significantly disrupted if Mac Milli or Cyberretail were to
terminate or breach their agreements or if they or Artist Development or Mac
Money suffer adverse developments that affect their ability to supply products
to us or fulfill our CD orders. If, for any reason, Artist Development or Mac
Money are unable or unwilling to supply products to us in sufficient quantities
and in a timely manner, we may not be able to secure alternative suppliers, on
acceptable terms in a timely manner, or at all. If Mac Milli Entertainment or
Cyberretail were unable or unwilling, due to employee strikes, inclement weather
or unforseen problems, to meet our distribution and shipping needs, or failed to
deliver CD's to our customers in a timely and accurate manner, our relationship
with customers could be adversely affected.
Without adequate insurance, computer viruses, electronic break-ins or similar
disruptive events could disrupt our services.
Computer viruses, electronic break-ins or similar disruptive events could
disrupt our ability to receive and fulfill orders for our CD's and other
merchandise, as well as our ability to provide the other services offered on our
web site. System disruptions could result in the unavailability or slower
response times of our web site, which would reduce the amount of commerce
conducted on our Web sites and lower the quality of our users' experience. Since
we do not have business interruption insurance, service disruptions could also
adversely affect our revenue and, if they were prolonged, would seriously harm
our business and reputation.
If our online security measures fail, we could lose visitors to our sites and
could be subject to claims for damage from our users, content providers,
advertisers and merchants.
Our relationships with consumers would be adversely affected and we may be
subject to claims for damage if the security measures that we intend to use to
protect their
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personal information, especially credit card numbers, are ineffective. In this
regard, we intend rely on security and authentication technology that we intend
to license from third parties to perform real-time credit card authorization and
verification with our bank. We cannot predict whether events or developments
will result in a compromise or breach of any technology we intend to use to
protect a customer's personal information.
Our infrastructure is vulnerable to unauthorized access, physical or
electronic computer break-ins, computer viruses and other disruptive problems.
Internet service providers have experienced, and may continue to experience,
interruptions in service as a result of the accidental or intentional actions of
Internet users, current and former employees and others. Anyone who is able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. Security breaches relating to our
activities or the activities of third-party contractors that involve the storage
and transmission of proprietary information could damage our reputation and our
relationships with our artists or any advertisers we may develop. We also could
be liable to our artists or any advertisers we may develop for the damages
caused by such breaches or we could incur substantial costs as a result of
defending claims for those damages. We may need to expend significant capital
and other resources to protect against such security breaches or to address
problems caused by such breaches. Our security measures may not prevent
disruptions or security breaches.
Insufficient proceeds from the sale of only the minimum number of share
In the event we can only sell the minimum number of shares, we may only be
able to sustain operations for a period of four months. The continued conduct of
operations beyond four months will require us to raise additional capital. Since
any such additional financing will probably be private and involve restricted
shares as opposed to the free trading shares we are selling in this offering,
there can be little assurance that we will be successful is raising any
additional capital. In addition, if we raise additional funds through the
issuance of equity securities, our stockholders may experience dilution of their
ownership interest, and the newly-issued securities may have rights superior to
those of the shares we are selling in this offering. If we raise additional
funds by issuing debt, we may be subject to limitations on our operations,
including limitations on the payment of dividends.
Our executive officers, directors and major stockholders beneficially own
approximately 61% of our outstanding common stock and consequently are able to
exercise significant control over Bodyguard.
Executive officers, directors and holders of 5% or more of our outstanding
shares together beneficially own approximately 61% of our outstanding common
stock. These stockholders are 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 Bodyguard and may make some transactions more difficult or
impossible to complete without the support of these stockholders.
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It may be difficult for a third party to acquire Bodyguard, and this could
prevent changes in our management.
We are subject to the Delaware anti-takeover laws regulating corporate
takeovers. These anti-takeover laws prevent a Delaware corporation from engaging
in a business combination involving a merger or sale of more than 10% of its
assets with any stockholder, including all affiliates and associates of the
stockholder, who owns 15% or more of the corporation's outstanding voting stock,
for three years following the date that the stockholder acquired 15% or more of
the corporation's stock unless:
* the board of directors approved the transaction where the stockholder
acquired 15% or more of the corporation's stock;
* after the transaction where the stockholder acquired 15% or more of
the corporation's stock, the stockholder owned at least 85% of the
corporation's outstanding voting stock, excluding shares owned by
directors, officers and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held under the plan will be tendered in a tender or exchange
offer; or
* on or after this date, the merger or sale is approved by the board of
directors and the holders of at least two-thirds of the outstanding
voting stock that is not owned by the stockholder.
A Delaware corporation may opt out of the Delaware anti-takeover laws if
its certificate of incorporation or bylaws so provide. We have not opted out of
the provisions of the anti-takeover laws. As such, these laws prohibit or delay
mergers or other takeovers or changes of control of Bodyguard and may discourage
attempts by other companies to acquire us.
Our certificate of incorporation and our bylaws include a number of
provisions that may delay, deter or impede hostile takeovers or changes of
control or management. These provisions include:
* our board may be classified into three classes of directors as nearly
equal in size as possible with staggered three year-terms;
* the authority of our board to issue up to five million shares of
preferred stock and to determine the price, rights, preferences and
privileges of these shares, without stockholder approval; and
* the elimination of cumulative voting.
Our certificate of incorporation and bylaws provide that we will indemnify
officers and directors against losses that may incur in investigations and legal
proceedings resulting from their services to us, which may include services in
connection with takeover defense measures. These provisions may have the effect
of preventing changes in our management.
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Risks related to our industry
If current standards to measure the effectiveness of advertising on the Internet
do not develop, our ability to attract and retain advertisers could be adversely
impacted.
There are currently few well established standards to measure the
effectiveness of advertising on the Internet and other digital media, and the
absence of these standards could adversely impact our ability to attract and
retain advertisers. Currently available software programs that track Internet
usage and other tracking methodologies are rapidly evolving, but such standard
measurements may never develop. In addition, the development of such software or
other methodologies may not keep pace with our information needs, particularly
to support the needs of any internal business we develop or the requirements of
any advertising clients we develop.
Software programs that prevent or limit the delivery of advertising may
seriously damage our ability to attract and retain advertisers.
A number of "filter" software programs have been developed which limit or
prevent advertising from being delivered to an Internet user's computer. This
software could adversely affect the commercial viability of Internet
advertising. These programs attempt to blank out, or block, banner and other
advertisements. To date, and because we have yet to develop any advertising
clients, such programs have not had any adverse impact on us. However, such
programs may adversely impact our future ability to attract and retain
advertisers or caused us to fail to meet the terms of any advertising agreements
we may enter into. Widespread adoption of this type of software would seriously
damage our ability to attract and retain advertisers.
We may need to change the manner in which we conduct our business if government
regulation increases.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address issues such as user privacy, pricing,
taxation, content, copyrights, security, distribution, and the quality of
products and services. Several telecommunications companies have petitioned the
Federal Communications Commission to regulate Internet service providers and
online services providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. Any imposition of access
fees could increase the cost of transmitting data over the Internet. In
addition, the growth and development of the market for online commerce may lead
to more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on us. The United States Congress has
enacted Internet laws regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material. The law of the Internet, however,
remains largely unsettled, even in areas where there has been some legislative
action. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as property ownership, libel and personal privacy
are applicable to the Web. Any new, or modifications to existing, laws or
regulations relating to the Web could adversely affect our business.
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Prohibition and restriction of Internet content and commerce could reduce
or slow Internet use, decrease the acceptance of the Internet as a
communications and commercial medium and expose us to liability. Any of these
outcomes could have a material adverse effect on our business, results of
operations and financial condition. The growth and development of the market for
Internet commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business over the Internet.
The Internet is subject to rapid changes, which could result in significant
additional costs.
The market for Internet products and services is characterized by rapid
change, evolving industry standards and frequent introductions of new
technological developments. These new standards and developments could make our
existing or future products or services obsolete. Keeping pace with the
introduction of new standards and technological developments could result in
significant additional costs or prove difficult or impossible for us. The
failure to keep pace with these changes and to continue to enhance and improve
the responsiveness, functionality and features of our Web sites could harm our
ability to attract and retain users. Among other things, we will need to license
or develop leading technologies, enhance our existing services and develop new
services and technologies that address the varied needs of our users.
Our net sales could be adversely affected if we become subject to sales and
other taxes.
If one or more states or any foreign country successfully asserts that we
should collect sales or other taxes on the sale of our products, our net sales
and results of operations could be harmed. We do not currently collect sales or
other similar taxes for physical shipments of goods into states other than
California and Florida. However, one or more states may seek to impose sales tax
collection obligations on companies, such as Bodyguard, which engage in or
facilitate online commerce. A number of proposals have been made at the state
and local level that would impose additional taxes on the sale of goods and
services through the Internet. Such proposals, if adopted, could substantially
impair the growth of electronic commerce and could adversely affect our
opportunity to derive financial benefit from electronic commerce. Moreover, if
any state or foreign country were to successfully assert that we should collect
sales or other taxes on the exchange of merchandise on its system, our results
of operations could be adversely affected. In addition, any new operations in
states outside California and Florida could subject our shipments in such states
to state sales taxes under current or future laws.
Legislation limiting the ability of the states to impose taxes on
Internet-based transactions has been enacted by Congress. However, this
legislation, known as the Internet Tax Freedom Act, imposes only a moratorium
ending on October 21, 2001 on state and local taxes on electronic commerce where
such taxes are discriminatory and on Internet access unless such taxes were
generally imposed and actually enforced before October 1, 1998. Failure to renew
this legislation would allow various states to impose taxes on Internet-based
commerce.
Our success depends on the continued development and maintenance of the Internet
and the availability of increased bandwidth to consumers.
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The success of our business will rely on the continued improvement of the
Internet as a convenient means of consumer interaction and commerce, as well as
an efficient medium for the delivery and distribution of music. Our business
will depend on the ability of our artists and consumers to conduct commercial
transactions with us, as well as to continue to upload and download music files,
without significant delays or aggravation that may be associated with decreased
availability of Internet bandwidth and access to our Web site. This will depend
upon the maintenance of a reliable network with the necessary speed, data
capacity and security, as well as timely development of complementary products,
such as high speed modems, for providing reliable Internet access and services.
The failure of the Internet to achieve these goals will reduce our ability to
generate significant revenue.
Our penetration of a broader consumer market will depend, in part, on
continued proliferation of high speed Internet access. The Internet has
experienced, and is likely to continue to experience, significant growth in the
numbers of users and amount of traffic. As the Internet continues to experience
increased numbers of users, increased frequency of use and increased bandwidth
requirements, the Internet infrastructure may be unable to support the demands
placed on it. In addition, increased users or bandwidth requirements may harm
the performance of the Internet.
The Internet has experienced a variety of outages and other delays and it
could face outages and delays in the future. These outages and delays could
reduce the level of Internet usage as well as the level of traffic, and could
result in the Internet becoming an inconvenient or uneconomical source of music
and related products and merchandise which would cause our revenue to decrease.
The infrastructure and complementary products or services necessary to make the
Internet a viable commercial marketplace for the long term may not be developed
successfully or in a timely manner. Even if these products or services are
developed, the Internet may not become a viable commercial marketplace for the
products or services that we offer.
Use of proceeds
The net proceeds we will receive from the sale of the shares of common stock
offered by us will be $950,000 if all the offered shares are sold and $200,000
if only the minimum number of offered shares are sold. We have computed these
net proceeds amounts based upon a public offering price of $2.50 per share and
after deducting our estimated offering expenses of $50,000. However, and in the
event we employ the services of broker dealers as selling agents, our offering
expenses could increase up to a maximum of $180,000.
The principal purpose of this offering is to fund our business plan and to
commence operations. Accordingly, we intend to apply the net proceeds of the
offering as follows:
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Category of Expenditure Amount of Net Proceeds
----------------------- ----------------------
Minimum Maximum
* Web site development $ 15,000 $ 15,000
* Purchase of computer equipment 10,000 10,000
* Marketing of our Web site and artists 100,000 600,000
* General and administrative expenses 25,000 50,000
* Initial manufacturing of CD's and merchandise 35,000 40,000
* Hiring of employees -- 200,000
* Working capital 15,000 35,000
-------- --------
Total $200,000 $950,000
Pending any use, the net proceeds of this offering will be invested in
short-term, interest-bearing securities.
Dividend policy
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
Capitalization
The following table sets forth our capitalization as of September 30, 2000:
* on an actual basis; and
* on an as adjusted basis to reflect our sale of both the minimum and
maximum number of shares offered by this prospectus at a public
offering price of $2.50 per share, after deducting the estimated
offering expenses payable by us. The adjusted amount assumes we will
be successful in selling the shares without the use of broker dealer
selling agents. If we wind up using selling agents, our offering
expenses could increase by up to a maximum of $180,000.
You should read this information together with our supplemental
consolidated financial statements and the notes to those statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of September 30, 2000
Actual Adjusted
Minimum Maximum
<S> <C> <C> <C>
Stockholders' (deficit) equity:
common stock, $.001 par value; 20,000,000
shares authorized;
900,000 shares issued and outstanding;
1,000,000 issued and outstanding, as adjusted
for the minimum, or 1,300,000 issued and out-
standing, as adjusted for the maximum; $ 900 $ 1,000 $ 1,300
Additional paid in capital 180,700 380,700 1,130,300
Accumulated deficit (211,404) (211,404) (211,404)
Total stockholders' equity (deficiency) (29,804) 169,296 918,896
</TABLE>
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DILUTION
Our negative net tangible book value as of September 30, 2000 was $29,804,
or approximately $(.0033) per share of common stock. Negative net tangible book
value per share is determined by dividing the amount of our total tangible
assets less total liabilities by the number of shares of common stock
outstanding at that date. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering made and the net tangible book value per
share of common stock immediately after the completion of this offering.
After giving effect to the issuance and sale of the minimum and maximum
number of shares of common stock offered by us and after deducting the estimated
offering expenses payable by us without the use of broker dealer selling agents,
our net tangible book value as of September 30, 2000 would have been $169,296,
or approximately $.17 per share if only 100,000 shares are sold, and $918,896 or
approximately $. 71 per share if all 400,000 shares are sold. This represents an
immediate increase in net tangible book value of $.173 per share minimum, or
$.713 per share, maximum, to existing stockholders; and an immediate dilution of
$2.33 per share minimum, or $1.79 per share maximum, to new investors purchasing
shares in this offering. The following table illustrates this per share
dilution:
<TABLE>
<CAPTION>
Minimum Maximum
<S> <C> <C>
Public offering price per share .................................. $ 2.50 $ 2.50
Net tangible book value per share at September 30, 2000 .......... (.0033) (.0033)
Increase in net tangible book value per share due to offering .... .173 .713
Net tangible book value per share after this offering ............ .17 .710
Dilution per share to new investors .............................. $ 2.33 $1.79
</TABLE>
Market for our common stock
There is currently, no public market for our common stock. At a future date and
if we meet the requirements, we will undertake to have our common stock listed
on the OTC Bulletin Board maintained by members of the National Association of
Securities Dealers, Inc.
Management's discussion and analysis
of financial condition or plan of operation
The following discussion should be read in conjunction with our financial
statements and notes to those statements and other financial information
appearing elsewhere in this prospectus.
Plan of operations
We are a development stage entertainment company with a limited history
and no revenue from operations, having only been incorporated on November 11,
1999. For the period from our inception through November 30, 2000, we
* Implemented a modest private offering of our common stock to fund our
pre-operating activities;
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* Signed artist recording agreements with three artists;
* Developed and launched our website www.bodyguardrecords.com on January
17, 2000; and
* Entered into an Internet distribution agreement with Cyberretail.com,
LLC, a non- affiliated company, as our exclusive distributor for the
fulfillment of orders for recorded music products and artist
merchandise sold via the Internet or on an 800 number.
For the 12 months following the sale of at least the minimum number of shares,
our principal objectives will be to:
* Secure national retail distribution for our CD's;
* Secure national exposure for our recording artists; and
* Initiate and implement the sale of CD's and related merchandise with
a view towards developing cash flow.
In anticipation of these goals, and during the period prior to the date of this
prospectus, we have:
* Developed and produced CD's for three of our five artists and
scheduled recording sessions for the remaining two;
* Expanded our website to include excerpts of three sample songs from
each of our first three artists;
* Arranged for three showcases in Hoboken, New Jersey where our artists
have and will perform live;
* Entered into a preliminary distribution agreement with Mac Milli
Entertainment, Inc., a non-affiliated company for the on-line
promotion of our three artists on the Mac Milli website and the
fulfilment of digital downloaded music orders; and
* Conducted a professional lip-sync video session shoot of our three
artists in anticipation of preparing three minute music videos for
display on our website and potential distribution to MTV and other
similar outlets
In the event we are successful in the sale of only the minimum number of
shares, we believe that the net proceeds of $200,000 will provide sufficient
funds to enable us to satisfy our cash requirements for at least four months.
The conduct of operations beyond this period will require the raising of
additional funds. However, and in the event we only sell the minimum number of
shares, Messrs. Rollo and Foley have agreed to accrue 20% of the salary called
for in their written employment agreements with Bodyguard until and unless we
can either raise additional capital or achieve a positive cash flow, whichever
sooner occurs.
Should we be successful in selling all 400,000 shares, we believe that the
net proceeds of $950,000 will provide sufficient funds to enable us to satisfy
our cash requirements for at least 12 months including the payment of full
salaries to Messrs. Rollo and Foley as called for in their written employment
agreements with Bodyguard.
Regardless of the amount of funds raised in this offering, the steps
remaining to be accomplished include the following:
* market our web site and artists;
* secure a national retail distribution deal for our CD's; and
* secure strategic marketing alliances with nationally recognized
companies.
Until we receive the proceeds of this offering, our activities will
continue to be limited. Without these proceeds we will not have the capital
resources or liquidity to:
* Implement our business plan;
* Commence operations through the recording, production or marketing of
any record albums; or
* Hire any additional employees.
Description of our business
History of Bodyguard
We are a development stage entertainment company without an operating
history, having only been incorporated on November 11, 1999. Since our
incorporation, we successfully launched our website www.bodyguardrecords.com. on
January 17, 2000 and on the same date entered into a Internet distribution
agreement to provide for the fulfillment of orders for our CD's and merchandise.
In addition, and on December 15, 1999, January 6, 2000 and February 1, 2000,
respectively, we entered into Artist Recording Agreement with three new artists,
Naked Underneath, a Pop/Rock group, Summer Snowmen, a Pop/Rock group; and Dennis
DeCambre, a R&B/Rap artist. On September 26, 2000, we entered into an Artist
Recording Agreement with June, a Pop/Rock group, and on December 12, 2000, we
entered into an Artist Recording Agreement with Love Saves The Day, featuring
Dean Davidson, a Pop/Rock group.
Overview
Our objective is to become an innovative Internet record company that will
primarily utilize the Internet and other emerging technologies such as Mp3 to
successfully promote and market our signed recording artists. We intend to allow
visitors to our website to have access to a variety of styles of music, a
database of a number of artists, with links to the artist's homepage and
biographical information. We intend to offer visitors to our website the
opportunity to order CD's via our mail order department, or via digital download
directly to their computer from Mac Milli Entertainment, a third party online
distribution company, at a reasonable cost.
In addition, we intend to utilize technology that provides a live video
link to recording sessions at our studio in New York City so fans can "sit in"
on an actual recording session. We intend to post a schedule of these sessions
on our website. If and when operational, our video link will incorporate several
different camera angles, so that our viewers can decide who or what he/she
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would like to observe, i.e. the singer, guitarist, drummer or even the producer
at the control board.
We intend to utilize traditional and non-traditional marketing and
distribution channels, such as Online services, interactive media and syndicated
radio and cable television, in order to cost effectively promote our website and
exploit the music entertainment rights which we may develop or acquire. Our
business plan was developed by our two principal executive officers and founders
John Rollo and Eugene Foley. Since inception, we have not had any revenue from
operations. There can be no assurance that any or all of our business plan will
be successfully implemented or that we will generate sufficient revenues from
operations to meet the requirements of our business.
Industry and Opportunity
In dollar terms, and according to Billboard Magazine, an industry trade
publication, music sales increased 6.3% in 1999, to $14.6 billion, up from $13.7
billion in 1998. However, and as indicated in the March 4, 2000 edition of
Billboard:
"In dollar terms, though, music sales increased 6.3% in 1999 to $14.6
billion from 12.2 billion last year. But this is not an entirely accurate
account of the market because the computations are based on suggested list
prices, and most product is sold at lower prices. In 1998 music sales rose
12.1% to $12.2 billion. With sales up 6.3% and units up only 3.2%, the
indication is that higher prices contributed at least three percentage
points to the dollar increase last year. Most music manufacturers did in
fact raise list and wholesale prices last year".
According to the Recording Industry Association of America, a trade group
whose members manufacture most of the music recordings produced in the United
States, sales of CD singles have increased from $6 million in annual sales in
1990, to $213 million in 1998 and from 1 million CD single units ships to 56
million units over the same period. Recording Industry Association of America's
research indicates an 11.6% increase in units shipped to direct and special
markets which include mail order operations, record clubs and non-traditional
retailers and a 7.4% increase in dollar value from these music sales between
1997 and 1998. Recording Industry Association of America estimates that sales by
mail order, record club and other non-traditional outlets account for 24.4% of
the total domestic market. One of the latest technological innovations in the
music industry has centered on digital distribution, the downloading of
compressed music files over the Internet to a PC. Online music sales
attributable to digital distribution remains small at this time, but we believe
it will be an increasing portion of the total pre-recorded online music sales
market in the near future. Forrester Research, Inc. predicts that revenues from
digital music downloads will reach $1.1 billion in 2003, equaling approximately
seven percent of total music sales. However, Jupiter Communications estimates
that revenues from digital music downloads will reach only $30 million by 2002.
The CD continues to be the driver of growth. Unit sales of CD albums rose
10.8% last year, to 939 million units.
The vast majority of the music listening audience is comprised primarily of
two age groups:
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15-24 and 25-49. For most individuals in these groups, popular music has been,
and remains, a major force in their lives. Although teenagers and young adults
purchase the majority of prerecorded music, the Recording Industry Association
of America estimates that their numbers have declined in recent years and that
the over-35 market has been increasing. This increase has been attributed to the
continuing trend by record labels to release product with broad-based appeal
that is able to attract occasional buyers. We intend to capitalize on this trend
in music by developing artists that will appeal to the occasional buyers in
selected markets.
There are currently five major labels which are generally recognized to
dominate the recording industry along with their subsidiary labels: Time/Warner;
Sony; BMG; Thorn-EMI; and Universal. Although independent labels individually
represent a small percentage of the market for prerecorded music, in 1999 sales
of albums, both new and catalog, by independent labels as a group constituted
the largest percentage market share in the prerecorded music market. We believe
that new artists and new trends in music are more likely to come from an
independent label as they can more easily react and adapt to shifting consumer
tastes.
Artist development and agreements
Our primary focus will be the development of new artist releases and
related artist development, encompassing modern rock, alternative and power-pop.
Our strategy is to develop and acquire a core group of independent labels to
which it will provide support services in order to maximize the opportunities
for discovering and minimize the risk associated with developing future
successful recording artists. We currently have one label, Bodyguard Records but
have not developed a roster of artists other than the following three artists:
"Naked Underneath", "Summer Snowmen" and "Dennis DeCambre" with whom we signed
written artist recording agreements on December 15, 1999, January 6, 2000 and
February 1, 2000, respectively. As of the date of this prospectus, we have:
* Completed the recording of the first CD for each of our artists;
* manufactured the first CD for each of our artists; and
* Conducted a professional lip-sync video session shoot of our three
artists in anticipation of preparing three minute music videos for
display on our website and potential distribution to MTV and other
similar outlets.
Our artists agreements, which are each for a term term of one record album
of a minimum of ten songs, grant to us options for between two and four
additional record albums. Subject to our sale of the minimum number of shares,
we were required to produce one record album for both Naked Underneath and
Dennis DeCambre by September 1, 2000. Unless extended in writing for an
additional three months, our artist agreements are terminable by the artist upon
our failure to meet our record production dates. Our artists agreements require
us to pay a semi- annual royalty of:
* $1.50 on the first 100,000 records;
* $2.00 on the next 100,000 records;
* $2.25 on the next 100,000 records;
* $2.50 for each record sold after that; and
* $3.00 for any copies sold directly to consumers at live performances.
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All royalty payments are to be made net after deduction for:
* returned or defective copies;
* our recording studio time calculated at $50.00 per hour, except with
respect to Summer Snowmen;
* manufacturing and design costs;
* 50% of the costs of any video or television promotional commercial;
and
* any promotional appearance costs and expenses.
Initially we intend to recruit additional new and emerging artists from the
alternative rock/pop genres. We may also purchase outright or license a finished
single or album by an artist in these or other genres. Once another new or
emerging artist is selected, we intend to enter into an agreement with the
artist similar to our artists agreements to either produce "demonstration"
recordings to permit us to determine the commercial viability of a new artist or
record one or two singles or an album for commercial release with options to
record additional albums, at our discretion, at an agreed upon recording budget
per recording or album. We intend that the recording agreement will fix
royalties and possibly advances to the artist for each album produced under the
agreement. In accordance with industry custom, any advances for albums after the
initial release would be likely to be based on a percentage of the artist's net
royalties from prior albums, less the recording budget. Should one of our
performing artists achieve significant sales for his, her or its most
recently-released album, it is likely that we would renegotiate that artist's
agreement, granting a higher royalty rate in return for the artist's agreement
to an extension of the recording contact for additional albums.
It is possible that we will be able to sign an established artist to a
recording contract, although we are not currently seeking to enter into a
recording contract with any established artists. We classify any artist that was
at one time signed by a major record company and which has a solid fan base as
an established artist. There can be no assurance, however, that any such
contract could be consummated. In the event that an established artist enters
into a recording contract with us, our operating expenses would most likely be
higher than those currently contemplated. This could result in an exhaustion of
our financing earlier than anticipated, unless offset or exceeded by increased
sales of the established artist's products.
If we develop commercially successful recording artists, there can be no
assurance that we will be able to maintain our relationships with such artists
even if we have entered into exclusive recording contracts with them.
Furthermore, recording artists occasionally request releases from their
exclusive recording agreement. Among the reasons that may cause an artist to
engage in so-called "label jumping" are expectations of greater income, advances
or promotional support
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by a competing label. There can be no assurance that any given artist developed
by us will not determine to request a release from his or her agreement with us.
Because of the highly personal and creative nature of the artist's contractual
obligations to us, it is not feasible to force an unwilling artist to perform
the terms of his or her contract with us. If we do release a "label jumping"
artist from his or her contract, it may be able to obtain an "override royalty"
as consideration for the release. Override royalties are customarily paid by the
released artist's new recording company and are based on a percentage of the
suggested retail selling price or wholesale price, depending on the particular
label in question, subject to certain deductions. Such royalties are payable
with respect to a negotiated number of the artist's albums after release from
his or her existing contract.
We will seek to contract with our artists on an exclusive basis for the
marketing of their recordings in return for a percentage royalty on the retail
selling price of the recording. We will generally seek to obtain rights on a
worldwide basis. Whenever possible, we intend to utilize our artists agreements
as a typical agreement format providing for the number of albums to be delivered
but without advances against royalties being paid upon delivery of each album or
upon signing of the contract. Provisions in contracts with established artists
vary considerably and may, for example, require us to release a fixed number of
albums and/or contain an option exercisable by us covering more than one album.
We will seek to obtain rights to exploit product delivered by the artists for
the life of the product's copyright. Under the contracts, advances are normally
recoupable against royalties payable to the artist. We will seek to recoup a
portion of certain marketing and tour support costs, if any, against artist
royalties.
Our Internet web site
Initially, the principal focus of our web site will be to:
* inform consumers about our artists, their schedule and special events;
* provide interviews and chats with our artists;
* offer music samples of our artists ; and
* to offer consumers the option of ordering CD's and other related
merchandise. In addition and supplemental to our agreement with
Cyberretail, and on November 11, 2000, we entered into a written
preliminary distribution agreement with Mac Milli Entertainment, Inc.,
a non-affiliated third party online distribution company to provide
digital downloaded distribution of our CD's to our customers who are
not interested in receiving a hard copy vis UPS or similar overnight
package delivery service. Cyberretail will continue to provide
Internet mail order credit card processing and order fulfillment via
hard copy.
Manufacturing and distribution
We currently have no record manufacturing or distribution capabilities. We
intend to enter into distribution or licensing arrangements with third parties.
In addition, we intend that any manufacturing of our recorded music will done by
independent third-parties on a purchase-order basis. We believe that there are a
sufficient number of manufacturing sources available and chooses its
manufacturers based on quality, service and price. Towards this end, and based
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upon our management's prior successful business relationship, we have commenced
contract negotiations with Artist Development Associates of Framingham, MA with
respect to the manufacturing of our compact discs. As of the date of this
prospectus, no agreement has been signed.
We have, however entered into an Internet Distribution Agreement with
Cyberretail.com, LLC, a non-affiliated company, as our exclusive distributor for
the sale of our recorded music products on the Internet. The agreement, which we
signed on January 17, 2000, is for a term of two years and requires us to pay a
commission of 26.5% of the retail price of any of our products sold by
Cyberretail. In consideration for its fee, Cyberretail agreed to be responsible
for the fulfillment of any and all orders for our recorded music products
ordered via the Internet or on an 800 number.
Historically, the strategy of the major labels has been to control
distribution channels. Nevertheless, the market shares of independent
distributors, rack jobbers or independent contractors that manage music
department of department stores such as K-Mart and Wal-Mart, mail order
companies, touch-tone 800 number sales, Internet sales, and television sales
have all increased. We believe that this growth, fueled by the development of
the Internet and other ongoing changes in the marketplace, will continue.
Another trend is the consolidation of retail outlets into large retail chains,
however, specialized distributors can be utilized to sell prerecorded music
products to large retail chains. Because of our small size, we may not be able
to take advantage of traditional distribution channels, such as specialized
distributors. However, we expects to be able to take advantage of interactive,
in-home marketing through the Internet, telephone, satellite relays, or other
evolving technologies that we believe will have a significant effect on
distribution in the future. However, there is little agreement as to precisely
what this effect will be. We believe that control and ownership of the creative
products will be a key factor in the new market where distribution can be
accomplished more quickly and inexpensively.
Typical distribution for an independent label such as ours is through
either a Major label- owned branch system or through independent distributors.
The major label-owned distribution companies offer national distribution,
consistent market visibility, accounts receivable and collection administration.
Independent distributors offer similar services, but normally on a much smaller
scale.
Copyrights and intellectual property
Our prerecorded music business, like that of other companies involved in
prerecorded music, will primarily rest on ownership or control and exploitation
of musical works and sound recordings. Our music entertainment products are
expected to be be protected under applicable domestic and international
copyright laws.
Although circumstances vary from case to case, rights and royalties
relating to a particular recording typically operate as follows: When a
recording is made, copyright in that recording vests either in the recording
artists and/or their production companies and is licensed to the recording
company or in the record company itself, depending on the terms of the agreement
between them. Similarly, when a musical composition is written, copyright in the
composition vests either in the writer and is licensed to a third-party music
publishing company, or in a third- party music publishing company or in a
publishing company owned and controlled by the artist. A public performance of a
record will result in money being paid to the writer and publisher. The
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rights to reproduce songs on sound carriers i.e., phonograph records, are
obtained by record companies or publishers from the writer or the publishing
company entitled to license such compositions. The manufacture and sale of a
sound carrier results in mechanical royalties being payable by the record
company to the publisher of the composition, who then remits a portion of such
royalties to the writer or writers of the composition at previously agreed or
statutory rate for the use of the composition and by the record company to the
recording artists for the manufacture and distribution of the recording. We
intend to operate in an industry in which revenues are adversely affected by the
unauthorized reproduction of recordings for commercial sale, commonly referred
to as "piracy," and by home taping for personal use.
Potential publishing revenues may be derived from our ownership interest in
musical compositions, written in whole or in part by our recording artists or by
writers who are signed exclusively to us. We intend to secure a partial
ownership position in the copyright to compositions written by our recording
artists or signed writers where such rights are available and have not been
previously sold or assigned. Performance rights in any compositions owned by us
will be enforced under agreements we intend to enter into with performing rights
organizations such as the American Society of Composers, Authors, and Publishers
Broadcast Music, Inc. and SESAC, Inc., which licenses the public performance of
a composition to commercial users of music such as radio and television
broadcasters, restaurants, retailers, etc., and disburse collected fees based
upon the frequency and type of public performances they identify. Generally,
revenues from publishing are generated in the form of:
* mechanical royalties, paid by the record company to the publisher for
the mechanical duplication of a particular copyrighted composition, as
distinct from the copying of the artist's performance of that
composition;
* performance royalties, collected and paid by performing rights
entities such as ASCAP and BMI for the actual public performance of
the composition as represented by radio airplay, Musak, or as a theme
or jingle broadcast in synchronization with a visual image via
television;
* sub-publishing revenues derived from copyright earnings outside of the
United States and Canada from our collection agents located outside of
the United States and Canada; and
* licensing fees derived from printed sheet music, uses in
synchronization with images as in video or film scores, computer games
and other software applications, and any other use involving the
composition.
Typically, music publishing agreements with songwriters are "exclusive,"
permitting us ownership of the copyrights in all compositions created by the
songwriter, in whole or in part, during the term of the agreement usually in
exchange for the payment of an advance to the songwriter and, after the
recoupment of such advance, the payment of royalties on sales of sound carriers
embodying any such compositions. In some cases, we may seek to acquire a catalog
of compositions previously created by a songwriter or group of songwriters as a
music publishing asset. The can be no assurance, however, that we will be
successful in entering into agreements with any songwriters or acquiring any
catalogs or that any agreements entered into will result in any revenue to us.
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We intend to engage in licensing activities involving both the acquisition
of rights to certain master recordings and the licensing and the granting of
rights to third parties in the master recordings and compositions we may
acquire.
Although we intend to file a trademark application for Bodyguard Records
with the United States Patent and Trademark Office, we have not yet obtained a
federal registration of this trademark in the United States and no assurance can
be given that such registration will be granted.
Competition
There are many companies that provide Web sites and online destinations
targeted to the record industry in general. All of these companies compete with
us for visitor traffic, advertising dollars and electronic commerce partners.
The market for Internet content companies in the record industry is new and
rapidly evolving. Competition for visitors, advertisers and electronic commerce
partners is intense and is expected to increase significantly in the future
because there are no substantial barriers to entry in our market. Increased
competition could result in:
* lower advertising rates;
* price reductions and lower profit margins;
* loss of visitors;
* reduced page views; or
* loss of market share.
Any one of these could materially and adversely affect our business, financial
condition and results of operations. In addition, our ability to compete
successfully depends on many factors. These factors include:
* the quality of the content provided by us and our competitors;
* how easy our respective services are to use;
* sales and marketing efforts; and
* the performance of our technology.
We compete with providers of prerecorded music and related products over
the Internet. Our current and anticipated competitors include:
* Atlantic Recording Group;
* Universal Music Group;
* RCA Records; and
* Arista Records.
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Many of our competitors and potential new competitors have:
* longer operating histories;
* greater name recognition in some markets;
* larger customer bases; and
* significantly greater financial, technical and marketing resources.
These competitors may also be able to:
* undertake more extensive marketing campaigns for their brands and
services;
* adopt more aggressive advertising pricing policies;
* use superior technology platforms to deliver their products and
services; and
* make more attractive offers to potential employees, distribution
partners, commerce companies, advertisers and third-party content
providers.
Our competitors may develop content that is better than ours or that
achieves greater market acceptance. It is also possible that new competitors may
emerge and acquire significant market share. This could have a material and
adverse effect on our business, financial condition and results of operations.
We also compete with the major labels and independent labels for
advertisers and advertising revenue. If advertisers perceive the Internet or our
network to be a limited or an ineffective advertising medium, they may be
reluctant to devote a portion of their advertising budget to Internet
advertising or to advertising on our website.
We may have to compete with Hardrive Records.com, Inc., a privately owned
Internet music company for which John Rollo, Eugene Foley and Kenneth
Pollendine, our three executive officers and directors, served as executive
officers, directors and principal stockholders. Until November 2000, when its
ceased doing business and sold its artists recording and other rights, Hardrive
Records operated out of the same offices as we do. John Rollo and Eugene Foley
are still parties to written employment agreements they entered into with
Hardrive Records which may compete with the written employment agreements they
entered into with Bodyguard Records. As a result of this situation, and until
the affairs of Hardrive are settled, we may find we have to compete with
Hardrive for the time and attention of John Rollo, Eugene Foley and Kenneth
Pollendine. This would put us in a position of almost having to compete with
ourself. The existence of these conflicts of interest during this period may
present a distraction and may diminish our chances to achieve profitable
operations.
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Environmental matters
We are not aware of any environmental liability relating to our facilities
or operations that would have a material adverse affect on us, our business,
assets or results of operations.
Employees
As of June 7, 2000, our only employees were John Rollo, Gene Foley and
Kenneth Pollendine, our executive officers and directors. Messrs. Rollo and
Foley are each devoting approximately 70% of their time to our affairs, while
Mr. Pollendine is only devoting 25% of his time to our affairs. Upon the sale of
at least the minimum number of shares, of which there can be no assurance, both
Messrs. Rollo and Foley have agreed to devote their full time, i.e., a minimum
of 40 and a maximum of 50 hours per week, to our business and affairs, and Mr.
Pollendine has agreed to devote 85% of his time to our business and affairs.
Towards this end and on December 1, 1999 Messrs. Rollo and Foley have each
entered into three year written employment agreements with us which were amended
on June 7, 2000. Under these employment agreements, they have each agreed to
accept salaries of $75,000 for the first year subject to a cost of living
adjustment in each of the two following years, together with customary health
benefits, vacation and expense reimbursement provisions. However, and in the
event we sell only the minimum number of shares, both Messrs. Rollo and Foley
have agreed to accrue 20% of their $75,000 first year salary until the earlier
of the raising of additional capital or the generation of positive cash flow. In
addition, we have agreed to pay them each a bonus if and when any of our artists
reach certain levels of net compact disc sales under our artist agreements. All
bonuses will be cumulative and payable within 30 days after confirmation of
sales as follows:
No. of CD's Sold Cash Bonus
---------------- ----------
100,000 $10,000
250,000 25,000
500,000 50,000
1,000,000 100,000
As an example, if one of our artists were to sell 1,500,000 CD's, we would
be required to pay a bonus of $185,000, i.e., $10,000 + $25,000 + $50,000 +
$100,000, each to John Rollo and Eugene Foley.
In addition, in the event either we are successful in selling all of the
offered shares or are successful in the sale of such number of CD's that we
reach positive cash flow, we intend to employ additional executive and/or
administrative personnel including a chief financial officer with industry
experience. In the interim, we intend to employ such part time or temporary
clerical and bookkeeping help as we deem necessary. We may also employ
independent consultants and advisors. We consider our relations with our
employees to be good.
Facilities
We maintain our principal executive offices and studio at 138 Fulton
Street, New York, New York 10038 where approximately 2,000 square feet of space
is subleased from a non-affiliated
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landlord under a four year written sublease expiring on August 31, 2001 at
monthly rentals starting at $1,800 and increasing to $2024. Our current rent is
$2,000 per month. The sublease was assigned to us by Rollo Entertainment, Inc.,
a Delaware corporation controlled by and under common control of John Rollo our
president, chief operating officer and a director. Our sublease, which is
personally guaranteed by our president, John Rollo requires us to pay all
utility costs and does not provide for an option to renew. Our present space is
adequate for our needs and we are using it to approximately 50% of its capacity.
Governmental regulations
Legislatures and government agencies have adopted and are considering
adopting laws and regulations regarding the collection and use of personal
information obtained from individuals when accessing web sites. For example,
Congress recently enacted the Children's Online Privacy Protection Act, which
restricts the ability of Internet companies to collect information from children
under the age of 13 without their parents' consent. In addition, the Federal
Trade Commission and state and local authorities have been investigating
Internet companies regarding their use of personal information. Our privacy
programs may not conform with laws or regulations that are adopted. In addition,
these legislative and regulatory initiatives may adversely affect our ability to
collect demographic and personal information from users, which could have an
adverse effect on our ability to provide advertisers with demographic
information.
Management
Directors and executive officers
The following table sets forth the executive officers, directors and key
employees of Bodyguard, their ages and the positions held by them:
NAME AGE POSITION
---- --- --------
Gene Foley 32 chief executive officer and director
John Rollo 44 president, chief operating officer
and director
Kenneth Pollendine 53 chief financial officer and director
Business experience
JOHN ROLLO has been our president, chief operating officer and a director since
our inception in November 1999. Simultaneously, and from February 1998 to
November 2000, Mr. Rollo also served as president and a director of Cream
Records, Inc., that changed its name to Hardrive Records.com, Inc., and which
intended to sell records over the Internet. Before that and for a period of
approximately 20 years, Mr. Rollo has been engaged in the creative development
and technical production of musical recordings. In this capacity, he has been
the recipient of Grammy awards for engineering and mixing of Jimmy Cliff's
"Cliffhanger", and a second Grammy award for producing Joe Cocker's contribution
in "The Bodyguard" motion picture soundtrack CD for Arista Records.
Additionally, Mr. Rollo has earned Recording Industry Association of America
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and/or Ampex Golden Reel awards for his involvement with the following music
productions:
Artist Album Award Contribution
------ ----- ----- ------------
Joe Cocker The Gold and Engineer
Bodyguard Multi-Platinum and
Soundtrack Producer
Jimmy Cliff Cliff Hanger Gold and Engineer,
Platinum Producer
and Mixer
The Kinks Phobia Gold Engineer
The Kinks State of Gold and Engineer
Confusion Platinum
The Kinks Give The Gold and Engineer
People Platinum, and Mixer
What They Ampex
Want Golden
Reel
The Kinks One For Gold and Engineer
The Road Platinum, and Mixer
Ampex
Golden
Reel
The Kinks Low Budget Gold and Engineer
Platinum, and Mixer
Ampex
Golden
Reel
The Kinks Superman Gold and Engineer
Platinum and Mixer
Joe Cocker Unchain My Gold and Engineer
Heart Platinum and Mixer
Joe Cocker One Night Gold and Engineer
of Sin Platinum and Mixer
Eric Clapton Knocking Gold and Engineer
On Platinum and Mixer
Heaven's
Door
Leslie All Washed Gold and Engineer
McKeown Up Platinum, and Mixer
Ampex
Golden
Reel
Kool & The Fresh Gold and Remixed
Gang Platinum
The Sweet Sweet Gold and Engineer
Fanny Platinum
Adams
Bonnie Secret Gold Producer
Tyler Dreams and and
Forbidden Engineer
Fire
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The Recording Industry Association of America is the generally recognized and
accepted industry association for sales certification purposes. Ampex Golden
Reel Awards are presented to recording studios, producers and engineers who
participate in an album that was recorded on Ampex reel to reel tape, and
reaches the "gold" milestone of 500,000 units sold. Mr. Rollo has signed many
new artists to major labels both in England and the United States. Once signed,
Mr. Rollo worked with the artists in order to develop songs, produce recordings
and overseeing progress through the various creative phases leading up to and
including final contract negotiations. In addition to these Grammy award
winners, Mr. Rollo has been engaged as producer and/or engineer with the
following recognized recording artists: Joe Cocker, Jimmy Cliff; Southside
Johnny & the Asbury Jukes, Phoebe Snow, Bonnie Tyler, Paul Young, The Kinks,
Eric Clapton, George Benson, Kool & the Gang, O'Jays, Stevie Nicks and Gang of
Four. In addition to Mr. Rollo's independent activities, he has acted as chief
engineer and record producer for the House of Music, then located in West
Orange, New Jersey, from 1985-1990.
GENE FOLEY has been our chief executive officer and a director since our
inception in November 1999. Simultaneously, and from February 1998 to November
2000, Mr. Foley also served as chief executive officer and a director of Cream
Records, Inc., that changed its name to Hardrive Records.com, Inc., and which
intended to sell records over the Internet. Before that since 1988 Dr. Foley has
served as the president of Foley Entertainment, a privately owned music industry
consulting firm in New Jersey which was incorporated in 1994 under the name
Foley Entertainment, Inc. Dr. Foley received a bachelor of arts degree in
political science from Kean University, Union, New Jersey, in 1991. In 1993, Dr.
Foley received a masters degree in political science from Pacific Western
University, New Orleans, LA. In 1994, Dr. Foley received a doctor of philosophy
degree in political science from the same university. In 1994, Dr. Foley
received a Juris doctor degree in law from Kensington University, Glendale, CA.
Dr. Foley's book "How To Make It In Music In Six Months...and Eighteen Years"
was co-written with Steve Parry, a former Columbia Records' recording artist.
Dr. Foley's clients have earned one Grammy award and four Recording Industry
Association of America gold record awards and one platinum award.
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Dr. Foley has contributed to music related features on NBC, MTV, VH-1, PBS, Fox
and in Forbes magazine. His clients have been involved in projects in various
capacities with numerous major labels including Columbia, RCA, Atlantic, Warner
Bros., EMI, Polygram, Capitol, Arista, Elektra, A&M, Epic, Geffen and Sony.
KENNETH POLLENDINE, has been our chief financial officer, secretary and a
director since our inception in November 1999. Simultaneously, and from February
1998 to November 2000, Mr. Pollendine also served as chief financial officer,
secretary and a director of Cream Records, Inc., that changed its name to
Hardrive Records.com, Inc., and which intended to sell records over the
Internet. Before that since 1994, Mr. Pollendine has been a private
entertainment and music consultant in London, UK. Before that since 1986, Mr.
Pollendine was employed by Oracle Corporation, a multinational manufacturer and
distributor of computer software, in increasingly responsible positions
including general manager and chief executive officer of Oracle's Southern
England operations. Mr. Pollendine received a bachelor of arts degree in
mathematics from Open University, London, UK in 1979.
Director compensation
We do not compensate our directors for their service as members of the board of
directors, although by resolution of the board adopted after this offering, they
may receive a fixed sum and reimbursement for expenses in connection with the
attendance at board meetings. We currently do not provide additional
compensation for special assignments of the board of directors. We may in the
future grant options to our directors to purchase shares of common stock.
Executive compensation
We have not paid any compensation to our officers and directors since our
inception, and we do not expect to pay any compensation in any amount or of any
kind to our executive officers or directors until the sale of at least the
minimum number of shares. If and when we close on the minimum number of shares
of our common stock, we intend to commence paying salaries to John Rollo and
Gene Foley under their employment agreements at the rate of $75,000 for the
first year. We also intend to commence paying a salary of $60,000 to Kenneth
Pollendine for the first full year following such closing. We have no written
employment agreement with Mr. Pollendine.
Option grants in last fiscal year
On February 4, 2000 we adopted a 2000 long term incentive plan where an
aggregate of 150,000 shares were reserved for issuance under this plan. Our plan
is administered by the board of directors as a means of attracting and retaining
key employees and compensating non-employee directors, consultants and others
who perform services on our behalf. Under our plan, our board of directors may,
from time to time, grant:
* Qualified stock options;
* non-qualified stock options;
* stock units;
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* restricted stock; and
* stock appreciation rights
to purchase common shares to officers, directors, employees and consultants who
render services to us. Awards under our plan are granted at a reasonable price
as determined by a committee of our board of directors that ultimately will
consist of at least two "disinterested" directors, except that the exercise
price of incentive stock options to persons who, at the date of grant, own stock
possessing more than ten percent of the combined voting power of our outstanding
stock, may not be less than one hundred ten percent of the fair market value of
our common stock. Until our board of directors is expanded to include two
outside directors, awards will be approved by the entire board of directors.
We have not granted any options to purchase our common stock under the Plan and
no option grants are currently contemplated.
Certain relationships and related transactions
On December 6, 1999, we issued an aggregate of 200,000 shares to Rollo
Entertainment, Inc. in consideration for:
* its granting to us of the two year right and license to utilize its
New York City recording studio and equipment valued at the fair
market value of the hourly rate of the studio time which is $150 per
hour. Since we used this equipment for 630 hours, we valued it at
$94,500; and
* assigning its sublease to us.
On December 6, 1999, we issued an aggregate of 200,000 shares to Gene Foley in
consideration for his contribution to us of an aggregate of $50 in cash and the
execution of his employment agreement with us as our chief executive officer. On
January 21, 2000, we issued an aggregate of 190,000 shares to three
non-affiliated individuals in consideration for an aggregate of $25,000 in cash
in order to launch our website and to commence this offering. Each of these
individuals agreed not to publicly sell any of their shares of our stock for 24
months. Later, and on various dates between February, 2000 and June, 2000, we
sold an aggregate of 310,000 shares for $.20 per share to a group of six
accredited investors In a private placement in order to raise $62,000 to
finalize the construction of our website, to conduct this offering and commence
operations. On various dates between July 15, 2000 and December 1, 2000, we
borrowed an aggregate of $60,000 from one accredited person in order to stay in
business until we can conduct this offering.
Our sublease, which is personally guaranteed by our president, John Rollo, was
assigned to us by Rollo Entertainment, Inc, a corporation controlled by and
under common control of John Rollo.
Principal stockholders
The following table sets forth information with respect to beneficial
ownership of our common
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stock, as of November 30, 2000 and as adjusted to reflect the sale of common
stock offered by us in this offering for:
* each person known by us to beneficially own more than 5% of our common
stock;
* each executive officer named in the summary compensation table;
* each of our directors; and
* all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Unless otherwise indicated, the address for Messrs.
Rollo and Foley is c/o Bodyguard Records, Inc., 138 Fulton Street, New York, New
York 10038. The address for Ellen Rosenberg is PO Box 1223, Long Beach, New York
11561. Except as indicated by footnote, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them. The number of shares of common stock outstanding used in calculating the
percentage for each listed person assumes that all shares offered by this
prospectus are sold. Percentage of beneficial ownership is based on 900,000
shares of common stock outstanding as of November 30, 2000, and 1,300,000 shares
of common stock outstanding after completion of this offering if all offered
shares are sold.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING OWNED AFTER
----------------- --------------------
OFFERING
MINIMUM MAXIMUM
Name of Beneficial Owner Number Percent Number Percent Number Percent
------------------------ --------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rollo Entertainment, Inc. 200,000 22% 200,000 20% 200,000 15%
Gene Foley 200,000 22 200,000 20 200,000 15
Ellen Rosenberg 150,000 17 150,000 15 150,000 11.5
All directors and executive
officers as a group (3 persons) 400,000 44% 400,000 40% 400,000 30%
</TABLE>
Market for our common stock
There is currently, no public market for our common stock. At a future date and
if we meet the requirements, we will undertake to have our common stock listed
on the OTC Bulletin Board maintained by members of the National Association of
Securities Dealers, Inc.
Shares eligible for future sale
As of November 30, 2000, we had an aggregate of 900,000 shares of our common
stock outstanding. All of these shares are "restricted securities" as such term
is defined under Rule 144, in that such shares were issued in private
transactions not involving a public offering and
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may not be sold in the absence of registration other than in accordance with
Rules 144 promulgated under the Securities Act of 1933 or another exemption from
registration.
In general, under Rule 144 as currently in effect, a person, including an
affiliate, who has beneficially owned shares for at least one year is entitled
to sell, within any three month period a number of shares that does not exceed
the greater of one percent of the then outstanding shares of our common stock or
the average weekly trading volume in our common stock during the four calendar
weeks preceding the date on which notice of such sales is filed, subject to
various restrictions. In addition, 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 would
be entitled to sell those shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate, such person's holding period for the purpose of effecting a sale
under Rule 144 commences on the date of transfer from the affiliates. As of
November 30, 2000, 655,000 shares were eligible for sale under Rule 144.
However, an aggregate of 190,000 of our outstanding shares were issued to
investors in our January 2000 bridge financing who agreed to voluntarily
restrict the public sale of such shares for a period of 24 months.
Description of our capital stock
General
Our certificate of incorporation authorizes the issuance of up to
20,000,000 shares of common stock, par value $.001 per share, and 2,000,000
shares of preferred stock, par value $.01 per share, the rights and preferences
of which may be established from time to time by our board of directors. As of
November 30, 2000, we had an aggregate of 655,000 shares of our common stock
outstanding and no shares of preferred stock were outstanding. As of November
30, 2000, we had nine stockholders of record.
Common stock
Under our certificate of incorporation, holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders, including the election of directors. They do not have
cumulative voting rights. Subject to preferences that may be applicable to any
then-outstanding preferred stock, holders of our common stock are entitled to
receive ratably dividends, if any, as may be declared by the board of directors
out of legally available funds. In case of a liquidation, dissolution or winding
up of Bodyguard, the holders of our common stock will be entitled to share
ratably in the net assets legally available for distribution to shareholders
after payment of all of our liabilities and any preferred stock then
outstanding. Holders of our common stock have no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to our common stock. The rights, preferences and privileges of
holders of our common stock are subject to the rights of the holders of shares
of any series of preferred stock that we may designate and issue in the future.
Preferred stock
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Under our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue from time to
time, shares of preferred stock in one or more series. The board of directors
may fix the number of shares, designations, preferences, powers and other
special rights of the preferred stock. The preferences, powers, rights and
restrictions of different series of preferred stock may differ. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of our common stock or affect adversely the rights and
powers, including voting rights, of the holders of our common stock. The
issuance may also have the effect of delaying, deferring or preventing a change
in control of our company. We currently have no shares of preferred stock
outstanding.
Plan of distribution
We intend to offer the Shares on a "self-underwritten or direct public
offering on a 100,000- Share-or-none" basis by our officers and directors who
will serve in this capacity without compensation. If a minimum of 100,000 Shares
has not been sold and paid for by midnight eastern time on the 90th day
following the date of this prospectus, all proceeds will be refunded promptly to
subscribers in full, without interest or deduction. If the last day of either of
these periods falls on a Saturday, Sunday or federal legal holiday, the next
following business day shall be considered the last day of such period. Pending
the sale of a minimum of 100,000 shares, all proceeds will be deposited in an
escrow account that we have established with Continental Stock Transfer & Trust
Company, 2 Broadway, 19th Floor, New York, NY 10004. Once a minimum of 100,000
shares have been sold and funds clear collection, we will break escrow and
deposit the proceeds in our operating account. We will also mail a stock
certificate to each purchaser of the shares. After that, we will continue to
offer the shares until the sooner of the expiration of 180 days or the sale of
all 400,000 shares. No shares will be issued to the public investors until such
time as the minimum amount of funds are released from the escrow account by us
within the time period described above. Although we have not entered written
agreement to that effect, none of our officers or directors intend to purchase
shares in order to satisfy our minimum share purchase requirement.
The shares may also be offered on a best-efforts basis by registered
broker-dealers that are members of the National Association of Securities
Dealers, Inc. Washington, D.C. 20006, on an agency basis. In the event that the
services of these selling agents are used, we will pay a 10% commission on all
such sales, and will also pay non-accountable selling expenses up to a maximum
of 3%. Any selling agents may be deemed to be statutory underwriters within the
meaning of the Securities Act. No selling agent has agreed to underwrite this
offering on a "firm commitment", "best efforts" or any other basis. We may
allocate a specific number of shares to any or each selling agent for sale.
However, such allocations may be reduced or revoked at any time during the
offering, and no selling agent is obligated to purchase or sell any minimum
number of shares.
Legal matters
The validity of the common stock covered by this registration statement will be
passed upon for Bodyguard by Lester Yudenfriend, Esq.
41
<PAGE>
Experts
The financial statements included in the registration statement on Form SB-2
have been audited by Sobel and Co., LLC, independent certified public
accountants, to the extent and for the periods set forth in their report, and
are included in reliance upon the authority of this firm as experts in auditing
and accounting.
Anti-takeover effects of Delaware law and
Our certificate of incorporation
The provision of our certificate of incorporation, which is summarized in
the following paragraph, may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider it its best interest, including those attempts that might result
in a premium over the market price for the shares held by stockholders.
Classified board of directors
Our board of directors may be divided into classes of directors serving
staggered terms. Upon expiration of the term of a class of directors, the
directors in that class may be elected for an additional term at the annual
meeting of stockholders in the year in which their term expires. In addition,
our board of directors may be removed only for cause and only by the affirmative
vote of holders of not less than 51% of our outstanding capital stock entitled
to vote generally in the election of directors. These provisions, when coupled
with the provision of our certificate of incorporation authorizing the board of
directors to fill vacant directorships, may delay a stockholder from removing
incumbent directors and simultaneously gaining control of the board of directors
by filling the vacancies created by such removal with its own nominees.
Transfer agent and registrar
The transfer agent for our common stock is Jersey Transfer & Trust Co., 201
Bloomfield Avenue, P.O. Box 36, Verona, New Jersey 07044.
Rule 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of:
* 1% of the number of shares of common stock then outstanding, which
will equal approximately 9,000 shares immediately prior to this
offering; or
* the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
42
<PAGE>
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months 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 other than an affiliate, is entitled to sell those shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless otherwise restricted,
"144(k) shares" may be sold at any time.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares in reliance on Rule 144, but without compliance with some
of the restrictions, including the holding period, contained in Rule 144.
Where you can find more information
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For further
information with respect to Bodyguard and the common stock, reference is made to
the registration statement and the attached exhibits and schedules.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information in our files in the Commission's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C., 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee, by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our Commission filings, including the
registration statement, will also be available to you on the Commission's
Internet site which is http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
43
<PAGE>
Part II: Information not required in prospectus
Item 24. Indemnification of directors and officers
Section 145 of the Delaware General Corporation law makes provision for the
indemnification of officers and directors in terms sufficiently broad to
indemnify officers and directors under certain circumstances from liabilities,
including reimbursement for expenses incurred, arising under the Securities Act.
Section 145 of the Delaware General Corporation law empowers a corporation to
indemnify its directors and officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
* for any breach of the director's duty of loyalty to the corporation or
its stockholders;
* for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
* arising under Section 174 of the Delaware General Corporation law; or
* for any transaction from which the director derived an improper
personal benefit.
The Delaware General Corporation law provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise.
The certificate of incorporation of Bodyguard provides for indemnification
of our directors against, and absolution of, liability to Bodyguard and its
stockholders to the fullest extent permitted by the Delaware General Corporation
law. Bodyguard intends to purchase directors' and officers' liability insurance
covering liabilities that may be incurred by our directors and officers in
connection with the performance of their duties.
The employment agreements we entered into with John Rollo and Gene Foley
provide that such executives will be indemnified by us for all liabilities
relating to their status as officers or directors of Bodyguard, and any actions
committed or omitted by the executives, to the maximum extent permitted by law
of the State of Delaware.
44
<PAGE>
Item 25. Other expenses of issuance and distribution
The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the registrant in
connection with the issuance and distribution of the common stock being
registered.
SEC registration fee.......................................... $ 278.00
Legal fees and expenses....................................... 30,000.00
Accountants' fees and expenses................................ 5,000.00
Printing expenses............................................. 7,500.00
Blue sky fees and expenses.................................... 2,000.00
Transfer Agent and Registrar fees and expenses................ 1,800.00
Miscellaneous................................................. 3,422.00
Total................................................... $50,000.00
Item 26. Recent sales of unregistered securities
The registrant has sold and issued the following securities since its
inception on November 12, 1999:
1. On December 6, 1999, the registrant issued an aggregate of 200,000
shares to Rollo Entertainment Corp., a Delaware corporation
controlled by and under common control of John Rollo the registrant's
president, chief operating officer and a director in consideration
for that corporation's granting to the registrant of a two year right
and license to utilize its New York City recording studio and
equipment valued at $94,500;
2. On December 6, 1999, the registrant issued an aggregate of 200,000
shares to Gene Foley in consideration for his contribution to the
registrant of an aggregate of $50 in cash and the execution of a
three year employment agreement with the registrant as its chief
executive officer;
3. On January 21, 2000, the registrant issued an aggregate of 150,000
shares to Ellen Rosenberg and 40,000 shares to two other
non-affiliated individuals in consideration for an aggregate of
$25,000 in cash in order to launch the registrant's website and to
commence this offering. Each recipient agreed not to publicly sell
his or her shares for a period of 24 months; and
4. On various dates between March 10, 2000 and July 28, 2000, the
registrant sold an aggregate of 310,000 shares for $.20 per share to
a group of six accredited investors In a private placement in order
to raise $62,000 to conduct this offering and commence operations.
The sales of the above securities were deemed to be exempt from registration in
reliance on Section 4(2) of the Securities Act of 1933, as a transaction not
involving any public offering or in accordance with Rule 506 of Regulation D
promulgated under the Securities Act. The recipients of securities in each of
these transactions represented their intention to acquire the
45
<PAGE>
securities for investment only and not with view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. In addition, each
recipient represented that the recipient was an "accredited investor" as that
term is defined under Rule 501(a)(4) of Regulation D promulgated by the
Commission under the Securities Act. All recipients had adequate access, through
their relationship with the registrant, to information about the registrant.
Item 27. Exhibits.
EXHIBIT
NUMBER DESCRIPTION
(3)(i) Certificate of Incorporation as filed November 12, 1999
(3)(ii) By laws
(4) Specimen Common Stock Certificate (defining rights)
(5) Opinion of Lester Yudenfriend, Esq.*
(10) Material Contracts
(10)a Equipment Lease with Rollo Entertainment Corp.
(10)b March 27, 2000 Sublease Assignment from Rollo Entertainment Corp.
(10)c Internet Distribution Agreement with Cyberretail.com, LLC
(10)d Artist recording Agreement with Naked Underneath
(10)e Artist recording Agreement with Dennis DeCambre
(10)f Artist recording Agreement with Summer Snowmen
(10)g Employment Agreement with John Rollo
(10)h Employment Agreement with Eugene Foley
(10)i 2000 Long Term Incentive Plan
(10)j Amendment to Employment Agreements with John Rollo and Eugene
Foley
(10)k September 26, 2000 Artist recording Agreement with June*
(10)l November 11, 2000 Agreement with Mac Milli Entertainment, Inc.*
(10)m Form of Subscription Agreement *
(10)n Form of escrow Agreement *
(10)o September 26, 2000 Artist Recording Agreement with Dean Davidson
delivered on December 12, 2000*
(23) Consent of Sobel & Co., LLC*
------------------
* Filed with this amendment
Item 28. Undertakings.
(a) The undersigned registrant undertakes:
(1) To file, during any period in which offers or sales of securities
are being made, a post- effective amendment to this registration
statement to (i) include any prospectus required by Section 10(a)(3)
of the Securities Act; (ii) reflect in the prospectus any facts or
events which, individually or together, represent a fundamental
change in the information in the registration statement, and (iii)
include any additional or changed material information on the plan of
distribution;
46
<PAGE>
(2) That, for the purpose of determining liability under the
Securities Act, each such post- effective amendment shall be deemed
to be a new registration statement relating to the offered securities
offered, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant under these provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 of 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 a 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.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of New
York, State of New York, on December __, 2000.
Bodyguard Records.com, inc.
By: /s/ John Rollo
------------------
John Rollo, president
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Gene Foley chief executive officer and director December , 2000
---------------------------
Gene Foley
/s/ John Rollo president and director December , 2000
---------------------------
John Rollo
/s/ Kenneth Pollendine (principal financial and accounting December , 2000
-------------------------- officer) and secretary
Kenneth Pollendine
</TABLE>
47
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
SEPTEMBER 30, 2000
CONTENTS
Page
Accountants' Compilation Report............................... 1
Financial Statements:
Balance Sheet............................................. 2
Statement of Operations................................... 3
Statement of Changes in Stockholders' Deficiency.......... 4
Statement of Cash Flows................................... 5
<PAGE>
ACCOUNTANTS' COMPILATION REPORT
To the Stockholders
Bodyguard Records.com, Inc.
New York, New York 10038
We have compiled the accompanying balance sheet of Bodyguard Records.com, Inc.
(A Development Stage Company) as of September 30, 2000 and the related
statements of operations, changes in stockholder's deficiency, and cash flows
for the six months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included with these financial statements, they might influence the user's
conclusions about the Company's financial position. Accordingly, these financial
statements are not designed for those who are not informed about such matters.
/s/ Sobel & Co., LLC
--------------------
Certified Public Accountants
Livingston, New Jersey
November 10, 2000
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
SEPTEMBER 30, 2000
================================================================================
ASSETS
CURRENT ASSETS:
Cash $ 16,696
OTHER ASSETS:
Deferred tax asset, net of
valuation allowance --
---------
$ 16,696
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 1,500
Loans payable 45,000
---------
Total Current Liabilities 46,500
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
Common stock, $0.001 par value, 20,000,000
shares authorized, 900,000 issued and outstanding 900
Additional paid-in capital 180,700
Deficit accumulated during the development stage (211,404)
---------
Total Stockholders' Deficiency (29,804)
---------
$ 16,696
=========
================================================================================
See accountants' compilation report. 2
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 1, 2000 THROUGH SEPTEMBER 30, 2000
================================================================================
NET SALES $ 4,212
----------
OPERATING EXPENSES:
Equipment lease expense 27,836
Rent 12,000
Insurance 872
Artist expenses 11,532
Office supplies --
Advertising 4,275
Website design --
Bank charges 19
Miscellaneous expenses 166
Office salaries 7,000
Telephone 1,755
Professional fees 5,000
Production/mixing 3,365
Recording materials 5,837
Travel 3,200
Business set up 2,627
----------
----------
Total Operating Expenses 85,484
----------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (81,272)
PROVISION FOR INCOME TAXES (350)
----------
NET LOSS $ (81,622)
==========
NET LOSS PER COMMON SHARE (0.10)
==========
WEIGHTED AVERAGE NUMBER COMMON
SHARES OUTSTANDING 782,500
==========
================================================================================
See accountants' compilation report. 3
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
SEPTEMBER 30, 2000
================================================================================
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Additional During The Total
Shares Common Paid In Development Stockholders'
Issued Stock Capital Stage Deficit
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 2000 665,000 $ 665 $ 133,935 $ (129,782) $ 4,818
Stock issued in exchange for cash 235,000 235 46,765 - 47,000
Net loss April 1, 2000 to September 30, 2000 - - - (81,622) (81,622)
-------------------------------------------------------------------------
Balance at September 30, 2000 900,000 $ 900 $ 180,700 $ (211,404) $ (29,804)
==========================================================================
</TABLE>
===============================================================================
See accountants' compilation report. 4
<PAGE>
BODYGUARD RECORDS.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 1, 2000 TO SEPTEMBER 30, 2000
================================================================================
CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
Net loss $ (81,622)
INVESTING ACTIVITIES:
Proceeds from loans payable 45,000
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 47,000
----------
INCREASE IN CASH 10,378
CASH AND CASH EQUIVALENTS:
Beginning of period 6,318
----------
End of period $ 16,696
==========
===============================================================================
See accountants' compilation report. 5
