SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENTS
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
(X) Preliminary Information Statement
( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
( ) Definitive Information Statement
STARLOG FRANCHISE CORPORATION
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule, or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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STARLOG FRANCHISE CORPORATION
945 BRIGHTON STREET
UNION, NEW JERSEY 07083
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement has been filed with the Securities and Exchange
Commission (the "SEC") and transmitted on or about June ___, 1998 to the holders
of record on May 22, 1998 (the "Record Date") of shares of common stock, par
value $.001 per share (the "Common Stock"), of Starlog Franchise Corporation, a
New Jersey corporation (the "Company"). This Information Statement is being
furnished pursuant to Section 14(c) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in connection with the amend of the Company's
Certificate of Incorporation (the "Amendment") so as to:
(i) change its name to "Retail Entertainment Group, Inc.".;
(ii) cause each currently outstanding share of the Company's $001 par
value common stock (the "Old Common Stock") to be converted into
one-tenth share of its new $01 par common stock (the "New Common
Stock") (such conversion being referred to herein as the "the
"Reverse Stock Split"); and
(iii) cause the number of shares that the Company is authorized to issue
to be reduced from 40,000,000 shares to 6,000,000 shares.
VOTING SECURITIES
This Information Statement is being mailed on or about June_____, 1998 to all
shareholders of record as of the Record Date.
The Company's Board of Directors by unanimous consent dated as of May 10 1998
approved the Amendment, subject to stockholder approval. Also by the written
consent of Stockholders who hold over 90% of the issued and outstanding shares
of Company (which consent was sufficient to approve the Amendment), the
shareholders of the Company have consented to the Amendment. The foregoing
consents by the Company's Board of Directors and Shareholders were subject to
the giving to all shareholders of record on the May 22, 1998 record date of 20
days notice of the Amendment as required by the Securities Exchange Act of 1934,
as amended and applicable provisions of New Jersey law.
As of the close of business on May 22, 1998, the Company had 24,237,636 shares
of Common Stock issued and outstanding, each entitled to one vote with respect
to the actions to be taken.
Stockholders of the Company as of the Record Date are entitled to notice of the
corporate action taken by written consent of holders of the issued and
outstanding shares of Common Stock. Such action will be effective twenty (20)
days following the mailing of this Information Statement.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of the Record Date by (i) each person
known by the Company to own beneficially 5% or more of any class of the
Company's voting stock, (ii) each director and executive officer of the Company,
and (iii) all directors and executive officers of the Company as a group. All
percentages in this section were calculated on the basis of outstanding
securities plus securities deemed outstanding under Rule 13d-3 of the Exchange
Act.
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Shares
Shares Held After
Name and Address of of Common Proposed Reverse Percentage of
Beneficial Owner Stock Held Stock Split Shares Held
- --------------------------------------------------------------------------------
Hope Associates, LLC(1) 16,000,000 1,600,000 61.01%
c/o Michael Michaelson
135 E. 71st St., Apt. 3A
New York, NY 10021
Kevin VanderKelen(2) 6,6558,000 655,800 27.06%
Goal Post Distributing, Inc.
13949-9 W. Hillsborough
Tampa, FL 33634
(1) Hope Associates LLC is a limited liability company owned and controlled by
the following Directors of the Company: Michael Michaelson and Herman Rush
each own approximately 25.833% of Hope Associates; Ray Markman and Mark
Savel each own approximately 17.222% of Hope Associates and Mr. Allan
Lyons owns the remaining 13.89% of Hope. Does not include a warrant to
purchase 500,000 shares of the Company's stock (post reverse split) for
$1.25 a share on or before March 31, 2003 which is currently exerciseable.
If the shares subject to such warrant are included, Hope will have
2,100,000 shares (after the proposed stock split) and its percentage,
assuming the purchase of such shares, and assuming that no other
outstanding warrants or options are exercised would be 71.82%.
(2) Includes 4,300,000 shares received in June 1997 in connection with the
sale to the Company of the assets of Goal Post Distributors, Inc.,
2,000,000 shares purchased by Mr. VanderKelen from the Company for
$250,000, and 105,000 shares purchase by Mr. VanderKelen and 153,000
shares purchased by Mr. VanderKelen's wife in the open market. Does not
include 1,000,000 shares reserved for issuance upon the exercise of
options to purchase Common Stock at a price of $5.00-$9.00 per share
granted to Mr. VanderKelen pursuant to his employment agreement with the
Company. All of such options are subject to the Goal Post division
achieving levels of revenues substantially above current levels. All of
the foregoing shares and prices are prior to giving effect to the proposed
1 for 10 stock split.
DIRECTORS AND EXECUTIVE OFFICERS
Shares
of Common Stock Held Percentage of
Name of Director or Stock Held after Reverse Shares Held
Executive Officer to Reverse Stock Split Split
- --------------------------------------------------------------------------------
Herman Rush(1)(5) (9)
Co-Chairman of the Board 4,133,334 413,333 17.05%
Michael Michaelson(1)(6) (9)
Co-Chairman of the Board 4,133,334 413,333 17.05%
Ray Markman(1)(7) (9)
Director 2,775,557 277,556 11.37%
Mark Savel(1)(4)(9)
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Director of Franchise
Development and Director 2,775,557 277,556 11.37%
Allan Lyons(8) 2,222,218 222,222 9.18%
ALL DIRECTORS AND OFFICERS
AS A GROUP
(SIX PERSONS) (9)
23,558,000 2,355,800 93.34%
- ----------
* less than 1%.
(1) All shares are expressed both before and after giving effect to the 1 for
10 Reverse Stock Split. Based on a total number of outstanding shares of
24,237,636, pre-Reverse Stock Split Share and 1,000,000 pre-split shares
subject to options which are currently exercisable sixty days of the
Record Date.
(2) Includes 1,000,000 pre-reverse split shares pursuant to currently
exercisable options.
(3) Does not include an option for 1,000,000 pre-split shares which is subject
to the Goal Post Division achieving revenue levels substantial in excess
of current levels. Includes 153,000 shares owned by wife.
(4) Based on Mr. Savel's approximately 17.222% interest in Hope Associates
which owns 16,000,000 pre-reverse split shares. Does not include Mr.
Savel's proportionate interest a warrant granted to Hope Associates to
purchase 500,000 shares.
(5) Based on Mr. Rush's approximately 25.833% interest in Hope Associates
which owns 16,000,000 pre-reverse split shares. Does not include Mr.
Rush's proportionate interest a warrant granted to Hope Associates to
purchase 500,000 shares.
(6) Based on Mr. Michaelson's approximately 25.833% interest in Hope
Associates which owns 16,000,000 pre-reverse split shares. Does not
include Mr. Michaelson's proportionate interest a warrant granted to Hope
Associates to purchase 500,000 shares.
(7) Based on Mr. Markmam's approximately 25.833% interest in Hope Associates
which owns 16,000,000 pre-reverse split shares. Does not include Mr.
Markman's proportionate interest a warrant granted to Hope Associates to
purchase 500,000 shares.
(8) Based on Mr. Lyons' approximately 13.9% interest in Hope Associates which
owns 16,000,000 pre-reverse split shares. Does not include Mr. Lyon's
proportionate interest a warrant granted to Hope Associates to purchase
500,000 shares.
(9) Includes shares held by or attributed to Mr. VanderKelen, a currently
exercisable option held by Mr. Fitzgerald and on the shares held by Hope
Associates. Does not include warrant held by Hope Associates to purchase
500,000 shares (after the reverse stock split, percentage held by all
Officers and Directors as a group would be 96.45%.
APPROVAL OF AMENDMENTS TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Company's approved amendments to the Company's Certificate of Incorporation
to (i) change the name of the Company to Retail Entertainment Group, Inc.; (ii)
reverse split the outstanding shares of the Company's common stock one-for-ten
(the "Reverse Split"); (iii) decrease the number of shares of common stock the
Company is authorized to issued from 40,000,000 to 6,000,000. Hope Associates,
LLC which holds 66.01% and Kevin M. VanderKelen who holds approximately 27.06%
of the Company's common stock respectively have approved these actions by
written consent, subject to giving notice to all of the Company's Shareholders.
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CHANGE OF CORPORATE NAME
The name "Starlog Franchise Corporation" was adopted by the Company when its
only business was the ownership and operation of retail stores that offer
science fiction and fantasy product. Since the time it was adopted, the Company
has closed down the Starlog stores; acquired KCK Corporation, which operates 13
bulk candy stores under the "Candy, Candy" or "Candico" name; acquired Goal Post
Distributors, Inc. which is a distributor of non-sports trading cards; and
determined to conduct any future sales of science fiction and fantasy products
under the "Shuttlecart" name.. Management believes that a more neutral name
which highlights the Company's focus on entertainment retail in general, rather
than just science fiction products, will permit it to pursue these opportunities
and will permit the parent company to be associated with more than one line of
business.
ONE-FOR TEN REVERSE SPLIT
As a result of the Reverse Split, each share of Common Stock outstanding at the
effective time of the Reverse Split, will, without any action on the part of the
holder thereof, becomes one-tenth share of Common Stock. The par value of the
Common Stock will increase from $0.001 per share to $0.01 per share pursuant to
the Reverse Stock Split. For purposes of this description, the Common Stock, as
presently constituted, is referred to as the "Old Common Stock" and the Common
Stock resulting from the Reverse Split is referred to as the "New Common Stock."
The Reverse Split will become effective upon the filing with the Secretary of
State of the State of New Jersey of an amendment to the Company's certificate of
incorporation (the "Amendment") which states that, upon the filing of the
Certificate of Amendment, each share of Old Common Stock then issued and
outstanding would automatically become and be converted into one-tenth share of
New Common Stock, subject to provisions for fractional shares.
Principal Effects of the Reverse Split
The principal effects of the Reverse Split will be as follows:
1. Based upon the 24,237,636 shares of Old Common Stock outstanding on the
Record Date, as a result of the Reverse Split approximately 2,423,763 shares of
New Common Stock would be outstanding.
2. There are outstanding as of the Record Date options and warrants to
purchase approximately 2,340,107 shares of their Company's Common Stock at
prices ranging from $0.06 to $.50 per share, (not including the Hope Associates
Warrant to purchase 500,000 shares which was granted on a "post split" basis).
Assuming the Reverse Split is implemented, each option or warrant will be
converted into an option or warrant to purchase one-tenth of a share of New
Common Stock at an exercise price equal to ten times the prior exercise price.
The Company will obtain new CUSIP numbers for the New Common Stock and publicly
traded warrants effective at the time of the Reverse Split. Following the
effectiveness of the Reverse Split, the Company will provide each record holder
of Old Common Stock and publicly traded warrants with information to enable such
holder to obtain new stock and warrant certificates.
Subject to the provisions for elimination of fractional shares, as described
below, consummation of the Reverse Split will not result in a change in the
relative equity position or voting power of the holders of Old Common Stock.
Assuming the Reverse Split is implemented, the Certificate of Amendment amending
the Certificate of Incorporation will be filed with the Secretary of State of
Delaware as promptly as practicable thereafter. The Reverse Split would become
effective as of the date of such filing (the "Effective Date").
Purposes of the Reverse Stock Split
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The Reverse Split would decrease the number of shares of Old Common Stock
outstanding and presumably increase the per share market price for the New
Common Stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who acquires
it, or the Company's reputation in the financial community, but in practice this
is not necessarily the case, as many investors look upon a stock trading under
$1.00 per share as unduly speculative in nature and, as a matter of policy,
avoid investment in such stocks.
Currently, trading in the Company's common stock is in the over-the-counter
market on the inter-dealer "Pink Sheets." In order to qualify for initial
listing on the Nasdaq SmallCap Market, a company must, among other requirements,
have at least $4,000,000 in total assets and a minimum bid price for its common
stock of $3.00 per share. The Company plans to apply for a listing of the
Company's Common Stock on the Nasdaq SmallCap Market subsequent to the filing of
the Amendment and completion of a private placement of its shares, the result of
both events, the Company hopes will result in it satisfying the requirement to
be listed on the Nasdaq SmallCap Market if it meets the criteria therefor at
that time. There can be no assurance that the Company will be successful in
listing its securities for trading. In addition, even if the Company qualifies
for initial listing on the Nasdaq SmallCap Market, there can be no assurance
that the Company will meet the criteria for continued listing of securities on
the Nasdaq SmallCap Market adopted by the Securities and Exchanges Commission
(the "Commission"). As currently in effect, criteria for continued listing
includes a minimum of $2,000,000 in total assets and a minimum bid price of
$1.00 per share of common stock. If an issuer does not meet the $1.00 minimum
bid price standard, it may, however, remain on the Nasdaq SmallCap Market if the
market value of its shares held by the public is at least $1,000,000 and the
issuer has capital surplus of at least $2,000,000. The Nasdaq Stock Market has
adopted heightened standards for continued listing on the Nasdaq SmallCap Market
which, if approved by the Commission, might make continued listing of the
Company's Common Stock more difficult. If the Company became unable to meet the
continued listing of criteria of the Nasdaq SmallCap Market because of continued
operating losses, or otherwise, and became delisted therefrom, trading, if any,
in the Common Stock and Stock Purchase Warrants would thereafter be conducted in
the over-the-counter market in the NASD's "Electronic Bulletin Board" or on the
inter-dealer "Pink Sheets." As a result, an investor may find it more difficult
to dispose of the Shares and the Warrants.
Since the Company's securities are not listed on the Nasdaq SmallCap Market,
they are subject to Rule 15g-9 under the Securities Exchange Act of 1934 (the
"Exchange Act"), which imposes additional sales practice requirements on
broker-dealers that sell these securities, except in transactions exempted by
Rule 15g-9, including transactions meeting the requirements of Rule 505 or
Regulation D under the Securities Act, and transactions in which the purchaser
is an institutional accredited investor (as defined) or an established customer
(as defined) of the broker dealer. The broker dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. Consequently, the rule may
affect the ability and/or willingness of broker dealers to sell the Company's
securities and may consequently affect the ability of purchasers in this
offering to sell the Shares and the Warrants acquired in this Offering.
The Commission has also adopted regulations which define a "penny stock" to be
any equity security that has a market price (as therein defined) of less than
$5.00 per share, subject to certain exemptions. Unless exempt, the rules require
the delivery, prior to any transactions in a penny stock, of a disclosure
schedule prepared by the Commission relating to the penny stock market.
Disclosure also must be made regarding commissions payable to both the
broker-dealer and the registered representative and the current quotations for
the securities. Finally, monthly statements must be sent, disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. The foregoing penny stock restrictions will not
apply to the Company's securities if the securities are listed on the Nasdaq
SmallCap Market and have certain price and volume information provided on a
current and continuing basis or if the Company meets certain minimum net
tangible assets or average revenue criteria. There can be no assurance that the
Company's securities will qualify for exemption from these restrictions. In any
event, even if the Company were exempt from these restrictions, it would remain
subject to Section 15(b)(6) of the Securities Exchange Act, which gives the
Commission the authority to prohibit any person that is engaged in unlawful
conduct while participating in a distribution of a penny stock from associating
with a broker dealer or participating in a distribution of penny stock, if the
Commission finds that a restriction would be in the public interest. If the
Company's securities were subject to the rules on
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penny stocks, the prices of, and market liquidity for, the Shares and the
Warrants would be severely adversely affected.
The Board of Directors believes that the Reverse Split is in the best interest
of the Company and its shareholders. The price of the Old Common Stock during
the period from January 1, 1997 through December 31, 1997 ranged from a high of
1 51/16 to a low of $0.13. On March 20, 1998, the closing price of the Company's
Common Stock was $.20 per share..
The Company requires additional capital for its operations and does not believe
that it will be able to raise the necessary capital unless the price of the
Common Stock is higher than the current Common Stock price levels. However, no
assurance can be given that the Reverse Split will result in any increase in the
Common Stock price or that the Company will be able to complete any financing
following the Reverse Split.
As of May 15, 1998, the Company's Common Stock was held by 88 shareholders of
record.
Exchange of Certificates and Elimination of Fractional Share Interests
On the Effective Date of filing of the Amendment, each ten shares of Old Common
Stock will automatically be combined and changed into one share of New Common
Stock with fractional share of the New Common Stock being rounded up to the
nearest share No additional action on the part of the Company or any shareholder
will be required in order to effect the Reverse Split. Shareholders will be
requested to exchange their certificates representing shares of Common Stock
held prior to the Reverse Split for new certificates representing shares of New
Common Stock. Shareholders will be furnished the necessary materials and
instructions to effect such exchange promptly following the Effective Date.
Certificates representing shares of Old Common Stock subsequently presented for
transfer will not be transferred on the books and records of the Company but
will be returned to the tendering person for exchange. Shareholders should not
submit any certificates until requested to do so. In the event any certificate
representing shares of Old Common Stock is not presented for exchange upon
request by the Company, any dividends that may be declared after the Effective
Date of the Reverse Split with respect to the Common Stock represented by such
certificate will be withheld by the Company until such certificate has been
properly presented for exchange, at which time all such withheld dividends which
have not yet been paid to a public official pursuant to relevant abandoned
property laws will be paid to the holder thereof or his designee, without
interest.
Federal Income Tax Consequences of the Reverse Split
The combination of each ten shares of the Old Common Stock into one share of New
Common Stock should be a tax-free transaction under the Internal Revenue Code of
1986, as amended, and the holding period and tax basis of the Old Common Stock
will be transferred to the New Common Stock received in exchange therefor.
This discussion should not be considered as tax or investment advice, and the
tax consequences of the Reverse Split may not be the same for all shareholders.
Shareholders should consult their own tax advisors to know their individual
Federal, state, local and foreign tax consequences.
Financial Statements
The Company's audited consolidated financial statements, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
respect to such financial statements, which are included in the annual report on
Form 10-KSB for the year ended December 31, 1997, are incorporated by reference
in this Information Statement. See "Incorporation by Reference."
CHANGE IN AUTHORIZED CAPITAL STOCK
The Board of Directors has approved the Amendment which will result in the
number of authorized shares of
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Common Stock, par value $.001 per share decreasing from 40,000,000 shares to
6,000,000 shares.
Discussion of the Amendment
Under the Company's certificate of incorporation, the Board of Directors of the
Company has authority to issue authorized and unissued shares of Common Stock
without obtaining approval from the holders of the Common Stock. Each share of
Common Stock is entitled to one vote.
The Board of Directors of the Company believes it will benefit the shareholders
to have almost 2,000,000 unreserved shares available for issuance in order that
adequate shares may be available for the possible issuance of Common Stock, in
connection with a possible financing of the Company's business or an acquisition
or for other purposes, although, as described above, the Company has no plans,
arrangements, understanding or commitments with respect to the issuance of such
shares.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Securities and Exchange Commission ("Commission").
The Company's reports, proxy statements and other information, can be inspected
and copied at the public reference room of the Commission at 450 Fifth Street
N.W., Washington, D.C. 20549 and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained from the public reference section of the Commission at its
Washington address at prescribed rates.
INCORPORATION BY REFERENCE
The Company will provide without charge to each person to whom a copy of this
Information Statement is delivered upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein
(including exhibits to such documents). Requests should be directed to: Starlog
Franchise Corporation, 945 Brighton Street Union, New Jersey 07083, Attn: Jack
Fitzgerald or may be requested by telephone at 1-800-STARLOG. The Company's
Annual Report on Form 10-KSB for the year ended June 28, 1997, as amended,
(without exhibits) is being delivered to shareholders simultaneously with this
Information Statement.
The following documents filed with the Commission by the Company are hereby
incorporated by reference into this Information Statement:
(1) The Company's Annual Report on Form 10-KSB, as most recently amended, for
the fiscal year ended June 29, 1997.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Information Statement to the extent that a statement contained herein or in
any subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies, supersedes or replaces such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Information Statement.
By Order of the Board of Directors
John Fitzgerald
Chairman of the Board
June _____, 1998
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