As filed with the Securities and Exchange Commission on October 20, 1997
Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIG ENTERTAINMENT, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 65-0385686
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
(561) 998-8000
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(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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MITCHELL RUBENSTEIN
CHIEF EXECUTIVE OFFICER
BIG ENTERTAINMENT, INC.
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
TELEPHONE NO. (561) 998-8000
FACSIMILE NO. (561) 998-2974
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES OF COMMUNICATIONS TO:
DALE S. BERGMAN, P.A.
BROAD AND CASSEL
201 SOUTH BISCAYNE BOULEVARD, SUITE 3000
MIAMI, FLORIDA 33131
TELEPHONE NO. (305) 373-9400
FACSIMILE NO. (305) 373-9443
-------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
---------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<PAGE>
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 1,000,002
$.01 par value........... shares $6.75 $6,750,013.50 $2,045.46
- -----------------------------------------------------------------------------------------------------
Common Stock, 100,000
$.01 par value(2)........ shares $5.00 $ 500,000.00 $ 151.52
- -----------------------------------------------------------------------------------------------------
Common Stock, 175,000
$.01 par value(3)........ shares $5.00 $ 875,000.00 $ 265.15
- -----------------------------------------------------------------------------------------------------
Common Stock, 32,500
$.01 par value(2)........ shares $6.24192 $ 202,862.40 $ 61.47
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TOTAL:............................................................................. $2,523.60
=====================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
(2) Represents shares issuable upon exercise of certain warrants, as more
fully set forth on the cover page of the Prospectus included herein. Also
includes such additional shares as may be issuable as a result of the
anti-dilution provisions of the warrants.
(3) Represents shares issuable upon the conversion of a convertible debenture,
as more fully set forth on the cover page of the Prospectus included
herein. Also includes such additional shares as may be issuable as a
result of the anti-dilution provisions of the convertible debenture.
</FN>
</TABLE>
================================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED October 20, 1997
PROSPECTUS
1,307,502 SHARES
BIG ENTERTAINMENT, INC.
COMMON STOCK
This Prospectus relates to shares (the "Shares") of Common Stock,
par value $.01 per share (the "Common Stock"), of Big Entertainment, Inc., a
Florida corporation ("Big Entertainment" or the "Company"), as follows: (i)
1,000,002 Shares issued in a July 1997 private placement (the "Private
Placement") proposed to be sold from time to time by certain shareholders of the
Company (the "Selling Shareholders"), (ii) 100,000 Shares issuable upon exercise
of warrants (the "Placement Agent's Warrants") issued to the placement agent for
the Private Placement, (iii) Shares issuable upon conversion of the Company's
$650,000 4% Convertible Debenture Due August 31, 1999 (the "Convertible
Debenture"), and (iv) 32,500 Shares issuable upon exercise of warrants (the
"Debenture Warrants") issued to the purchaser of the Convertible Debenture. See
"Selling Shareholders." The Company will not receive any proceeds from the sale
of the Shares by the Selling Shareholders or upon conversion of the Convertible
Debenture, but will receive up to an aggregate of approximately $703,000 upon
the exercise of the Placement Agent's Warrants and the Debenture Warrants.
The Selling Shareholders have advised the Company that they may from
time to time sell all or a portion of the Shares offered hereby in one or more
transactions in the over-the-counter market, on the Nasdaq SmallCap Market, the
Boston Stock Exchange, the Philadelphia Stock Exchange, or on any other exchange
on which the Common Stock may then be listed, in privately negotiated
transactions or otherwise, or a combination of such methods of sale, at market
prices prevailing at the time of sale or prices related to such prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
the Shares for whom they may act as agent (which compensation may be in excess
of customary commissions). The Selling Shareholders and any participating
broker-dealers may be deemed to be "underwriters" as defined in the Securities
Act of 1933, as amended (the "Securities Act"). Neither the Company nor the
Selling Shareholders can estimate at the present time the amount of commissions
or discounts, if any, that will be paid by the Selling Shareholders on account
of their sales of the Shares from time to time. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities, including
certain liabilities under the Securities Act. See "Plan of Distribution."
The Common Stock is quoted on the Nasdaq SmallCap Market under the
symbol "BIGE" and is listed on the Boston and Philadelphia Stock Exchanges under
the symbol "BIG." On October 16, 1997, the last reported sales price of the
Common Stock on the Nasdaq SmallCap Market was $6.75 per share.
---------------------
<PAGE>
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
---------------------
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 OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------
THE DATE OF THIS PROSPECTUS IS __________, 1997
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices located at Seven World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and may also be obtained from the Commission's website
located at http://www.sec.gov. Quotations relating to the Company's Common Stock
appear on the Nasdaq SmallCap Market, and reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006. Quotations also appear on the Boston and Philadelphia
Stock Exchanges and the previously mentioned information may be inspected at One
Boston Place, Boston, Massachusetts 02108, and 1900 Market Street, Philadelphia,
Pennsylvania 19103, respectively.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect to
the Shares. This Prospectus, which is a part of the Registration Statement, does
not contain all the information set forth in, or annexed as exhibits to, such
Registration Statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect to
the Company and the Shares, reference is hereby made to such Registration
Statement, including the exhibits thereto. Copies of the Registration Statement,
including exhibits, may be obtained from the aforementioned public reference
facilities of the Commission upon payment of the fees prescribed by the
Commission, or may be examined without charge at such facilities. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are incorporated in and made a part of this Prospectus by
reference:
(a) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996; and
(b) the Company's Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 1997, and June 30, 1997.
-3-
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the sale of all of the Shares shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. 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 Prospectus to the extent that a statement contained herein,
or in any other subsequently filed documents, which also are incorporated or
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. The Company hereby undertakes to
provide, without charge, to each person, including any beneficial owner, to whom
a copy of this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the information incorporated herein by
reference. Exhibits to any of such documents, however, will not be provided
unless such exhibits are specifically incorporated by reference into such
documents. The requests should be addressed to: Mitchell Rubenstein, Chief
Executive Officer, Big Entertainment, Inc., 2255 Glades Road, Suite 237 West,
Boca Raton, Florida 33431, telephone number (561) 998-8000.
THE COMPANY
GENERAL
Big Entertainment is a diversified entertainment company, which owns
exclusive rights to certain original characters and concepts created by
best-selling authors and media celebrities, including, for example, Tom Clancy,
Leonard Nimoy, Gene Roddenberry, Mickey Spillane, Arthur C. Clarke, John Jakes,
Anne McCaffrey, Margaret Weis and Isaac Asimov. The Company develops these
characters and concepts (collectively, its "intellectual property") and then
seeks to license these properties across all media, including films and
television, and in books, multimedia software, toys and other merchandise. The
Company acquires the rights to its intellectual properties pursuant to
agreements that generally grant it, on an exclusive basis, all rights in the
intellectual property itself (including, but not limited to, the right to
license the intellectual property for films, television, books, multimedia
software, toys and other merchandise) as well as the right to use the creator's
name in the title of the intellectual property. The Company also develops and
operates a chain of retail studio stores and kiosks which sell entertainment
merchandise.
The Company's intellectual properties include, among others: TOM
CLANCY'S NETFORCE; LEONARD NIMOY'S PRIMORTALS; ARTHUR C. CLARKE'S CRIOSPHINX;
GENE RODDENBERRY'S XANDER IN LOST UNIVERSE; ISSAC ASIMOV'S I/BULLET/BOTS; MICKEY
SPILLANE'S MIKE DANGER; JOHN JAKES' MULLKON EMPIRE; ANNE MCCAFFREY'S ACORNA: THE
UNICORN GIRL; ANNE MCCAFFREY'S SARABAND; MARGARET WEIS' TESTAMENT OF THE DRAGON;
TAD WILLIAMS' MIRROR WORLD; NEIL GAIMAN'S MR. HERO -- THE NEWMATIC MAN; NEIL
GAIMAN'S TEKNOPHAGE; NEIL GAIMAN'S LADY JUSTICE; NEIL GAIMAN'S WHEEL
-4-
<PAGE>
OF WORLDS; and CATHY CASH SPELLMAN'S MILLENNIUM. A more detailed summary of the
Company's intellectual properties is set forth in " - Intellectual Properties"
below. Certain of the Company's intellectual properties, including TOM CLANCY'S
NETFORCE, are owned by a joint venture known as NetCo Partners ("NetCo
Partners"), owned 50% by the Company and 50% by C.P. Group, Inc. ("C.P. Group").
The Company has signed an agreement with pro basketball star Magic Johnson to
develop textbooks, children's books, novels, and action figure cartoon
characters with special appeal to children. The Company is continually
negotiating with other best-selling authors and media and sports celebrities to
create and develop additional intellectual properties for the Company and/or
NetCo Partners to license for use in various media and merchandise.
The Company's licensing division is the primary means by which the
Company utilizes its intellectual properties by focusing on licensing the
Company's intellectual properties for feature films, television series, books,
toys, multimedia software and other merchandise. A number of the Company's
and/or NetCo Partners' intellectual properties have been licensed for use in
books, feature films, television series and merchandise by various licensees,
including The ABC Television Network, a division of The Walt Disney Company
("ABC"), for development of a television mini-series based on TOM CLANCY'S
NETFORCE; Warner Books (a division of Time-Warner, Inc.) for hardcover and
paperback book publishing rights; Playmates Toys, Inc. for a line of toys;
HarperCollins (a division of Rupert Murdoch's News Corporation) for hardcover
and paperback book publishing rights; Alliance Productions, Ltd., a division of
Alliance Communications Corporation, the largest Canadian entertainment company,
for television rights; Sierra On-Line, a publisher of interactive entertainment,
productivity and educational software, for CD-ROM rights; and Miramax Films (a
division of The Walt Disney Company) for feature film and television rights. The
licensing agreements generally provide for the payment by the licensee of
advances to the Company or NetCo Partners, as the case may be, as well as
royalty payments based on sales after the advance has been earned out. The
Company and NetCo Partners are actively negotiating additional licensing
opportunities for their intellectual properties. The Company also is a book
licensor and packager, wherein it focuses on developing and executing book
projects, typically with best selling authors and media and sports celebrities.
The Company's entertainment retail division concentrates on developing,
operating and franchising Big Entertainment retail studio stores and retail
kiosks, primarily located in shopping malls, which sell apparel, collectibles
and other entertainment merchandise. As of the date of the Prospectus, the
Company operates one Big Entertainment in-line studio stores and 32 Big
Entertainment kiosks. The Company plans to focus its future efforts on
developing additional in-line studio stores, which will average approximately
3,000 square feet in size (as compared to approximately 166 square feet for a
kiosk). In May 1997, the Company signed its first U.S. franchise agreement,
under which one Big Entertainment retail studio store is expected to be
constructed by the franchisee in the Philadelphia area by 1998. This franchise
agreement, with a private investor, also provides for the construction of up to
three more franchised studio stores in the Philadelphia region. The Company is
party to an agreement with ABC, pursuant to which, TV monitors in the Company's
retail outlets carry ABC programming in exchange for promotional and advertising
spots for Big Entertainment retail outlets on ABC affiliate television stations
in most of the markets where the Company has retail stores.
-5-
<PAGE>
The Company's management expects to require additional financing for
the expansion of its business, and in particular the growth of the Company's
retail division and to support working capital requirements in future years. The
Company currently is exploring financing alternatives to allow the Company to
finance such expansion, although there can be no assurance that such financing
alternatives will be available to the Company or will be available on terms
favorable to the Company. Such financing may take the form of an investment in
equity securities or convertible debt securities of the Company, and may result
in dilution to the Company's shareholders.
The principal executive offices of the Company are located at 2255
Glades Road, Suite 237 West, Boca Raton, Florida 33431, and its telephone number
is (561) 998-8000.
INTELLECTUAL PROPERTIES
The Company's intellectual properties have been developed pursuant to
agreements with best-selling authors and media celebrities, which agreements
generally grant the Company all rights (including all media rights) to the
original intellectual property (which includes one or more characters). The
Company actively seeks to license the intellectual properties to third parties
for use in various media. The Company is generally obligated to pay the authors
or celebrities royalties based on its sales of illustrated novels utilizing the
intellectual properties, and additional fees based on amounts received by the
Company from the licensing to third parties of the rights to produce other
products featuring the intellectual properties. The Company seeks when possible
to license its intellectual properties on terms that provide to the Company
advance payments against royalties to be earned and that minimize the Company's
additional development costs going forward.
The Company's current intellectual properties, which are owned either
directly by the Company or through NetCo Partners, include:
/bullet/ LEONARD NIMOY'S PRIMORTALS: Inspired by his research at the
SETI (Search for Extraterrestrial Intelligence) Program, the story by
Leonard Nimoy, actor, director and author (best known for his role as
"Spock" on STAR TREK), is about primordial creatures, some benign and
some deadly, abducted from Earth eons ago by space aliens, who are now
coming home to Earth.
/bullet/ TOM CLANCY'S NETFORCE: A narrative set in the year 2010
involving the policing of computer systems and the establishment of
NETFORCE, an elite enforcement division of the FBI whose specialty is
crimes on the world-wide Internet. The property is being developed for
NetCo Partners by Tom Clancy (the best-selling author of geopolitical
thrillers, including THE HUNT FOR RED OCTOBER, PATRIOT GAMES, CLEAR AND
PRESENT DANGER and EXECUTIVE ORDERS) in collaboration with Steve
Pieczenik, who previously collaborated with Mr. Clancy in the creation
of the best-selling TOM CLANCY'S OP-CENTER series of novels.
-6-
<PAGE>
/bullet/ GENE RODDENBERRY'S XANDER IN LOST UNIVERSE: A space adventure,
based on a concept created by the late creator of STAR TREK, featuring
Xander, a cyborg clone who has been endowed with the secrets of the
Lost Universe. Pursuing him is Lady Sensua, an evil being of immense
power who wants those secrets, even if she must tear Xander apart to
get them.
/bullet/ ISAAC ASIMOV'S I/BULLET/BOTS: A tale of seven android
superheroes, based on a concept created by the late Isaac Asimov
(author of more than 400 science and science fiction books and widely
regarded as the dean of 20th Century science fiction writers).
/bullet/ MICKEY SPILLANE'S MIKE DANGER: When Mike Danger, hard-boiled
private eye of the 1950s, wakes up in the year 2045, the peace-loving
citizens of the future are given a violent history lesson in 20th
Century crime fighting. The story is based on a concept created by
Mickey Spillane, a prolific best-selling mystery writer whose private
eye character "Mike Hammer" has been featured in comic strips, movies
and television series.
/bullet/ JOHN JAKES' MULLKON EMPIRE: A dynastic, Borgia-like family has
built an interstellar financial empire on the galactic garbage
business. The property was developed by the author John Jakes, whose
novels NORTH AND SOUTH, LOVE AND WAR, HEAVEN AND HELL and THE KENT
FAMILY CHRONICLES have all been on The New York Times' best-sellers
lists and have been made into successful television mini-series.
/bullet/ TAD WILLIAMS' MIRROR WORLD: The story follows mirror-like
windows that appear outside New York, Los Angeles, London, Tokyo and
other major cities around the world, opening passages to a new and
dangerous universe. Mr. Williams is the author of best-selling novels
including the MEMORY, SORROW AND THORN trilogy, CALIBAN'S HOUR and
TAILCHASER'S SONG.
/bullet/ ANNE MCCAFFREY'S ACORNA: THE UNICORN GIRL: This tale unfolds
when a pod is found in deep space. From it emerges Acorna, part human,
part mythical creature, who is traveling the cosmos in search of her
origins. Ms. McCaffrey is the author of New York Times best-selling
fantasy novels, including THE DRAGON RIDERS OF PERN series.
/bullet/ MARGARET WEIS' TESTAMENT OF THE DRAGON: A dragon-possessed,
immortal human, seeks to track and destroy the evil dragon who controls
him. Ms. Weis is a New York Times best-selling author of numerous sword
and sorcery novels and has developed many popular role-playing games.
/bullet/ ARTHUR C. CLARKE'S CRIOSPHINX: Developed by Arthur C. Clarke,
the author of 2001: A SPACE ODYSSEY, about the revival of Alexander the
Great in the 21st Century.
/bullet/ NEIL GAIMAN'S MR. HERO -- THE NEWMATIC MAN: A whimsical tale
of a steam-powered, Victorian robot reactivated in modern Los Angeles
by a young street pantomime named Jenny. Mr. Gaiman is writer and
co-creator of the SANDMAN comic book series, which has been called the
"best monthly comic book in the world" by The Los Angeles Times
-7-
<PAGE>
and which is being developed by Warner Bros. as a feature film. Mr.
Gaiman has also been voted the number one comic writer for the last
three years in COMIC BUYERS GUIDE reader polls.
/bullet/ NEIL GAIMAN'S TEKNOPHAGE: TeknoPhage, a dinosaur-like C.E.O.
lives in a terrifying outerworld and manipulates the lives of others.
/bullet/ NEIL GAIMAN'S LADY JUSTICE: When the scales of justice are
unbalanced, the Lady Justice entity possesses a wronged woman to serve
her cause, infusing the host body with great power. The woman must seek
justice until she finds victory or death.
/bullet/ NEIL GAIMAN'S WHEEL OF WORLDS: Interweaves the stories of
several of Gaiman's characters.
/bullet/ CATHY CASH SPELLMAN'S MILLENNIUM (working title): In the year
2018, the world as we know it has ceased to exist, leveled by nuclear
and environmental disasters. The United States has splintered, torn
into bits by advancing oceans and earthquakes. In the tattered remnants
of the former city of New York, the survivors of the disasters cope
with a strange new world containing mutants, robots, and
extraterrestrials.
-8-
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect
the Company's actual results and could cause such results to differ materially
from any forward-looking statements that may be deemed to have been made in this
Prospectus or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this Prospectus that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "intend," "could," "estimate" or "continue" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may cause or contribute to such
difference in results include, but are not limited to, those discussed in the
sections captioned "Risk Factors" below as well as those discussed elsewhere in
this Prospectus and from time to time in the Company's filing with the
Commission.
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<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. BEFORE INVESTING IN THE COMMON STOCK, PROSPECTIVE PURCHASERS SHOULD
CAREFULLY CONSIDER THE MATTERS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION
SET FORTH IN THIS PROSPECTUS.
LIMITED OPERATING HISTORY. The Company began generating revenues and
emerged from the development stage in the fourth quarter of 1994. Accordingly,
the Company has a limited operating history from which an evaluation of the
Company's prospects may be made. The Company's prospects must be considered in
light of the numerous risks, expenses, problems and difficulties typically
encountered in connection with the establishment of a new business, the
development and introduction of new products, and the competitive environment in
which the Company is operating. There can be no assurance that the Company can
successfully implement its current operating plan.
OPERATING LOSSES AND ACCUMULATED DEFICIT. The Company has incurred
significant net losses since its inception, including net losses of $6,655,609
and $8,439,892 for the years ended December 31, 1996 and 1995 and $1,342,927 for
the six months ended June 30, 1997. The Company had accumulated deficits of
$21,992,633 and $23,438,393 at December 31, 1996 and June 30, 1997,
respectively. Although the Company reported a profit of $185,210 for the second
quarter of 1997, there can be no assurance that the Company will continue to
generate adequate revenues to offset operating expenses and consistently achieve
profitable operations.
AVAILABILITY OF CASH AND WORKING CAPITAL. The Company's cash and cash
equivalents at December 31, 1996 and June 30, 1997 totaled $1,675,852 and
$410,505, respectively. The Company had working capital at December 31, 1996 of
$1,285,093 and a working capital deficit at June 30, 1997 of $1,253,499. During
the year ended December 31, 1996, the Company used $6,133,454 of cash to fund
its operating activities and incurred a net loss of $6,655,609 during such
period. During the six months ended June 30, 1997, the Company used $2,484,007
of cash to fund its operating activities and incurred a net loss of $1,342,927
during such period. The long-term financial success of the Company is dependent
upon the Company's ability to generate adequate revenue to offset operating
expenses. Although the Company had positive earnings in the quarter which ended
June 30, 1997 and generated net proceeds of approximately $4,000,000 in the July
1997 Private Placement and the offering of the Convertible Debenture, the
Company continues to seek additional financing to fund its growth plan and for
working capital. Any such additional financing may result in dilution to the
Company's shareholders. Based on currently proposed plans and assumptions
relating to its operations, the Company believes that anticipated cash flow from
operations and its other current sources of capital will be sufficient to
satisfy the Company's working capital requirements through 1997. If the
Company's plans change or its assumptions prove to be inaccurate, the Company
may be required to seek further financing or to curtail its operations. There
can be no assurance that any additional financing, if required, will be
available to the Company, or that if available, such financing will be on terms
favorable to the Company.
-10-
<PAGE>
RETAIL OPERATIONS. The success of the Company's entertainment retail
division depends upon the Company's ability to open and operate Big
Entertainment studio stores and kiosks on a timely and profitable basis. The
Company intends to expand its retail operations through the opening of
additional Company-owned studio stores and kiosks and the implementation of a
franchising program. In May 1997, the Company entered into its first U.S.
franchise agreement. The successful realization of the Company's expansion plans
depends on, among other things, the ability of the Company and its franchisees
to secure suitable sites, to hire, train and retain qualified personnel; to
obtain leases on favorable terms; to secure any required financing; and the
general business and economic conditions in the localities of its retail
outlets. There can be no assurance that the Company will be successful in
expanding or operating its retail outlets or continuing the implementation of
its franchise program.
COMPETITION. Competition is generally intense in the entertainment
industries in which the Company operates. In the licensing market, the Company
competes with a wide range of other corporations as well as individuals, many of
which have more financial resources than the Company. The Company's
entertainment retail division competes for sales with specialty stores and other
retail outlets which offer entertainment merchandise. There can be no assurance
that the Company will be able to compete successfully in any of these market
segments.
TRADEMARKS AND PROPRIETARY RIGHTS. The Company's intellectual
properties are the principal assets of the Company's licensing and publishing
divisions. The Company has filed applications for federal trademark registration
of its existing trademarks and files applications for trademark and copyright
protection for each of its intellectual properties. Although to date the Company
has approximately 20 U.S. registered trademarks, there can be no assurance that
any such additional applications, when filed, will be approved, or that the
Company will have the financial and other resources necessary to enforce its
proprietary rights against infringement by others. The inability of the Company
to obtain adequate protection of or to enforce its proprietary rights could have
a material adverse effect on the Company.
DEPENDENCE ON MANAGEMENT. Mitchell Rubenstein, the Company's Chairman
of the Board and Chief Executive Officer, and Laurie S. Silvers, the Company's
Vice Chairman and President, have been primarily responsible for the
organization of the Company and the development of its business. Each of them
has entered into an employment agreement with the Company that expires in July
1998. Such employment agreements generally provide, among other things, that the
Company's termination of either of such agreements without "cause" will also
constitute a termination of the other agreement without "cause" (as defined in
such agreements), and that an executive whose employment agreement is terminated
without cause shall continue to receive his or her salary until the expiration
of the term of the agreement. The Company is the beneficiary of $1,000,000 in
key man insurance on the lives of each of these executives. The loss of the
services of either of these individuals would have a material adverse effect on
the Company. The Company's future success will also be dependent upon its
ability to attract and retain qualified and creative management, administrative
and other personnel.
SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDERS. As of the date of this
Prospectus, the Company's executive officers and directors beneficially owned in
the aggregate approximately
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<PAGE>
29.9% of the outstanding shares of Common Stock. As a result, such persons have
the ability to significantly influence the outcome of any matters submitted to a
vote of the Company's shareholders.
DIVIDENDS. The Company has not paid any cash dividends on its Common
Stock since its inception. Dividends on the Company's Series A Preferred Stock
and Series B Preferred Stock are payable solely in shares of Common Stock. The
Company's outstanding Series C Preferred Stock accrues cash dividends at the
annual rate of 4%. The Company intends to retain earnings remaining after
payment of such cash dividends to finance the development and expansion of its
business.
TRADING MARKET FOR COMMON STOCK. The Company's Common Stock is quoted
on The Nasdaq SmallCap Market and the Boston and Philadelphia Stock Exchanges.
There currently is a relatively limited trading market for the Common Stock.
Furthermore, there can be no assurance that a more active trading market for the
Common Stock will develop or, if developed, that it would be sustained.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Common
Stock could be subject to significant fluctuation in response to the Company's
operating results and other factors, including general price fluctuations in
securities markets. From time to time the stock markets have experienced extreme
price and volume fluctuations. This volatility has had significant effects on
the market prices of securities issued by many companies, especially smaller
public companies, often for reasons unrelated to their operating performance.
SHARES ELIGIBLE FOR FUTURE SALE. As of the date of this Prospectus,
approximately 4,247,171 shares of Common Stock held by existing shareholders
(including the 1,000,002 Shares issued in the Private Placement registered
hereby) constitute "restricted shares" as defined in Rule 144 under the
Securities Act ("Rule 144"), and may only be sold if such shares are registered
under the Securities Act or sold in accordance with Rule 144 or another
exemption from registration under the Securities Act. Sales under Rule 144 are
subject to the satisfaction of certain holding periods, volume limitations,
manner of sale requirements, and the availability of current public information
about the Company. Substantially all of the Company's restricted shares of
Common Stock are either eligible for sale pursuant to Rule 144 or have been
registered under the Securities Act for resale by the holders thereof (including
the 1,000,002 Shares issued in the Private Placement registered hereby), which
will permit the sale of such registered shares of Common Stock in the open
market or in privately negotiated transactions without compliance with the
requirements of Rule 144. The Company is unable to estimate the amount, timing
or nature of future sales of outstanding Common Stock. Sales of substantial
amounts of the Common Stock in the public market may have an adverse effect on
the market price thereof.
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. As
of the date of this Prospectus, the Company has outstanding options granted
under the Company's stock option plans to purchase an aggregate of 858,698
shares of Common Stock, warrants to purchase an aggregate of 752,766 shares of
Common Stock, 217,600 shares of Series A Preferred Stock convertible into
217,600 shares of Common Stock, 121,393 shares of Series B Preferred Stock
-12-
<PAGE>
convertible into 121,393 shares of Common Stock, 20,000 shares of Series C
Preferred Stock convertible into 316,205 shares of Common Stock and the
Convertible Debenture convertible into 130,323 shares of Common Stock based on
the conversion price that would be applicable if converted on October 16, 1997.
As long as such options, warrants and convertible securities remain unexercised
or are not converted, as the case may be, the terms under which the Company
could obtain additional capital may be adversely affected. Moreover, the holders
of the options, warrants and convertible securities may be expected to exercise
or convert them at a time when the Company would, in all likelihood, be able to
obtain any needed capital by a new offering of its securities on terms more
favorable than those provided by such securities.
ANTI-TAKEOVER PROVISIONS. The Company's Articles of Incorporation
authorize the issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Company's
Board of Directors. Accordingly, the Board of Directors is empowered, without
shareholder approval, to issue shares of preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could also be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company, although the Company has no intention as of the date of
this Prospectus to issue any additional series of its preferred stock.
The Company has adopted a Shareholders' Rights Plan and in September
1996 declared a dividend of one right ("a Right") for each outstanding share of
Common Stock. Each Right entitles the holder thereof to purchase from the
Company one share of Common Stock at a price of $25.00 per share upon the
occurrence of specific events. See "Description of Capital Stock --Shareholders'
Rights Plan." Such Rights may cause substantial dilution to a person or group
that attempts to acquire the Company in a manner or on terms not approved by the
Board of Directors. The Shareholders' Rights Plan is intended to encourage a
person interested in acquiring the Company to negotiate with, and to obtain the
approval of, the Board of Directors in connection with such a transaction. The
Shareholders' Rights Plan, however, may discourage a future acquisition of the
Company, including an acquisition in which shareholders might otherwise receive
a premium for their shares. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so.
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<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of any of or all of
the Shares of Common Stock being offered by the Selling Shareholders hereunder
or upon conversion of the Convertible Debentures, but may receive an aggregate
of approximately $703,000 upon exercise of all of the Warrants and the Placement
Agent's Warrants. Such proceeds, if any, will be used for working capital and
other corporate purposes.
Expenses expected to be incurred by the Company in connection with the
registration of the Shares are estimated at approximately $10,000.
-14-
<PAGE>
SELLING SHAREHOLDERS
The Company has been advised by the Selling Shareholders that none of
the Selling Shareholders has or had a position, office or other material
relationship with the Company or any of its affiliates within the past three
years. Unless otherwise indicated, the following table sets forth certain
information with respect to the ownership of the Company's Common Stock by each
Selling Shareholder as of the date of this Prospectus.
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME AND ADDRESS OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------ ----------------------- -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Leonard Adams....................... 28,571 * 28,571 0 *
5030 Champion Boulevard
Boca Raton, FL 33496
Paul Alter.......................... 21,429 * 21,429 0 *
1111 Park Avenue
New York, NY 10128
David Babiarz....................... 28,571 * 28,571 0 *
1035 Glencrest
Inverness, IL 60010
Marvin Barish....................... 14,286 * 14,286 0 *
5227 Dumfries
Houston, TX 77096-5104
Baron Associates.................... 14,286 * 14,286 0 *
Barry Levites
341 East 149 Street
Bronx, NY 10451
Barrington Capital Group, L.P....... 100,000(2) 1.45% 100,000(2) 0 *
888 Seventh Avenue
New York, NY 10019
James Beldner....................... 14,286 * 14,286 0 *
3091 Riverside Drive
Wantagh, NY 11793
Efraim Bodek........................ 7,143 * 7,143 0 *
1024 Virginia Street
Far Rockaway, NY 11691
CLFS Equities....................... 28,571 * 28,571 0 *
410 17th Street
Suite 1705
Denver, CO 80202
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME AND ADDRESS OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------ ----------------------- -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
W. Paul Craig & .................... 7,143 * 7,143 0 *
Imogean Craig, Community Property
5901 Camray Circle
Carmichael, CA 95608-1733
D. Stake Mill, Inc.................. 14,286 * 14,286 0 *
Douglas Lundmark - Up Finance
P.O. Box 1124
McMinnville, OR 97128
Jay Dalgetty........................ 28,571 * 28,571 0 *
2111 Fairway Green Drive
Kingwood, TX 77339
Dennis J. Drebsky................... 14,286 * 14,286 0 *
7 Glen Hill Court
Dix Hills, NY 11746
Explorer Partners, LLC.............. 130,323(3) 1.89% 130,323(3) 0 *
444 N. Michigan Avenue, Suite 2910
Chicago, IL 60611
David Fried......................... 7,143 * 7,143 0 *
43 Patton Drive
E. Brunswick, NJ 08816
John Friedler....................... 7,143 * 7,143 0 *
P.O. Box 566
Bedford, NY 10506
Richard Gilbert..................... 14,286 * 14,286 0 *
10351 Ardis Road
Roscoe, IL 61073
Doug Gill........................... 14,286 * 14,286 0 *
Lower Rannieshill Farm
Newmakhar Aderdeen
Scotland, AB21 OUF
United Kingdom
Stuart W. Gold...................... 28,571 * 28,571 0 *
335 Greenwich Street
New York, NY 10013
Jimmy Hanks......................... 7,143 * 7,143 0 *
4124 Deer Point Lake Drive
Panama City, FL 32409
Richard H. Hantke................... 14,286 * 14,286 0 *
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME AND ADDRESS OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------ ----------------------- -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
5451 River Park Drive
Libertyville, IL 60048
Terence Leslie Hudson............... 135,714 1.97% 135,714 0 *
330 Sandbanks Road
Evening Hill
Poole Dorset
England, BH14 8HY
Steven Israel....................... 14,286 * 14,286 0 *
35 Henry Drive
Glen Cove, NY 11542
Robert A. Jacobs.................... 14,286 * 14,286 0 *
40 Fifth Avenue
New York, NY 10011
Frank Juranich...................... 7,143 * 7,143 0 *
5790 Broadway
Bronx, NY 10463
Dr. Harvey Kaplan................... 7,143 * 7,143 0 *
14333 Laurel Bowie Road
Suite 205
Laurel, MD 20708
Gilman R. King...................... 7,143 * 7,143 0 *
646 Golf Lane
LK Barrington Shores, IL 60010
David Kohane, D.M.D................ 21,429 * 21,429 0 *
333 West 86th
Apt. 902B
New York, NY 10024
Richard S. Koreyva.................. 14,286 * 14,286 0 *
141 Glenview Drive
Lawrenceville, NJ 08648
Leckson Unlimited................... 71,429 1.04% 71,429 0 *
101 High Street Earith
Huntington Cambs
PE173PN, England
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME AND ADDRESS OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------ ----------------------- -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
John Lilley......................... 7,143 * 7,143 0 *
Heath House
Lynn Road
Hillington
Kings Lynn Norfolk
England
Paul Matusow........................ 14,286 * 14,286 0 *
20191 East Country Club Drive
Aventura, FL 33180
Guy Montanari....................... 7,143 * 7,143 0 *
82 Payne Road
Danbury, CT 08810
Steven M. Ostner.................... 28,571 * 28,571 0 *
420 West End Avenue # 7B
New York, NY 10024
Gary and Rebecca Perrine............ 28,571 * 28,571 0 *
2470 Tarpon Road
Naples, FL 34102
Michael Pizitz...................... 14,286 * 14,286 0 *
1901 Hidden Dunes
9815 Hway 98 West
Destin, FL 32541
Malladi and Pravina Reddy,.......... 42,857 * 42,857 0 *
2012 Haggin Oaks Drive
Bakersfield, CA 93311
Myron Reinhart...................... 14,286 * 14,286 0 *
69 Fifth Avenue, Apt. 17D
New York, NY 10003
Ronold Roth......................... 28,571 * 28,571 0 *
516 West Main Street
Cold Spring Harbor, NY 11724
Alan J. Rubin....................... 28,571 * 28,571 0 *
17231 Coral Cove Way
Boca Raton, FL 33496
Joseph Russoniello.................. 14,286 * 14,286 0 *
14025 Osprey Links Road
Condo # 372
Orlando, Florida 32837
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME AND ADDRESS OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
SHAREHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------ ----------------------- -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Wayne Saker......................... 28,571 * 28,571 0 *
6840 Gulfport Boulevard. S
# 318
St. Petersburg, FL 33701
Michael Schwartzbard................ 7,143 * 7,143 0 *
133 Eileen Drive
Cedar Grove, NJ 07009
Mark Scioscia....................... 7,143 * 7,143 0 *
330 Shields Lane
Sewickley, PA 15143
Stan F. Sech........................ 28,571 * 28,571 0 *
2 Brentside Executive Centre
Great West Road
Brentford
Middlesex
TW8 9DA
Floyd M. and Ilyse Smith............ 7,143 * 7,143 0 *
191 Carlough Place
Mahwah, NJ 07430
Robert Damon Spitzer................ 14,286 * 14,286 0 *
264 Village Boulevard
Building # 2
Incline Village, NV 89451
Gershon A. Stern.................... 28,571 * 28,571 0 *
2179 East Landis Avenue
Vineland, NJ 08360
Ramie Tritt......................... 7,143 * 7,143 0 *
5362 Hallford Drive
Dunwoody, GA 30338
W. Ed and Vickie S. Tyler,.......... 28,571 * 28,571 0 *
631 North Lincoln
Hinsdale, IL 60521
Stella and Cynthia Zimmer,.......... 7,143 * 7,143 0 *
1315 East 102 Street
Brooklyn, NY 11236
</TABLE>
- -------------------------
* Less than 1%.
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<PAGE>
(1) Assumes that all Shares are sold pursuant to this offering and that no
other shares of Common Stock are acquired or disposed of by the Selling
Shareholders prior to the termination of this offering. Because the
Selling Shareholders may sell all, some or none of their Shares or may
acquire or dispose of other shares of Common Stock, no reliable estimate
can be made of the aggregate number of Shares that will be sold pursuant
to this offering or the number or percentage of shares of Common Stock
that each Selling Shareholder will own upon completion of this offering.
(2) Includes the Shares of Common Stock issuable upon exercise of the
Placement Agent's Warrants.
(3) Shares of Common Stock issuable upon conversion of the Convertible
Debenture and the shares of Common Stock issuable upon exercise of the
Debenture Warrants. Additional shares were registered in the Registration
Statement of which this Prospectus forms a part with respect to
additional shares of Common Stock that may be issued upon conversion of
the Convertible Debenture pursuant to the terms thereof.
PLAN OF DISTRIBUTION
The Selling Shareholders have advised the Company that they may from
time to time sell all or a portion of the Shares offered hereby in one or more
transactions in the over-the-counter market, on the Nasdaq SmallCap Market, the
Boston Stock Exchange, the Philadelphia Stock Exchange, or on any other exchange
on which the Common Stock may then be listed, in privately negotiated
transactions or otherwise, or a combination of such methods of sale, at market
prices prevailing at the time of sale or prices related to such prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
the Shares for whom they may act as agent (which compensation may be in excess
of customary commissions). The Selling Shareholders and any participating
broker-dealers may be deemed to be "underwriters" as defined in the Securities
Act. Neither the Company nor the Selling Shareholders can estimate at the
present time the amount of commissions or discounts, if any, that will be paid
by the Selling Shareholders on account of their sales of the Shares from time to
time. The Company has agreed to indemnify the Selling Shareholders against
certain liabilities, including certain liabilities under the Securities Act.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed broker-dealers or pursuant to
available exemptions from such requirements. In addition, in certain states the
Shares may not be sold therein unless the Shares have been registered or
qualified for sale in such state or an exemption from such requirement is
available and is complied with.
The Company will pay certain expenses in connection with this offering,
estimated to be approximately $10,000, but will not pay for any underwriting
commissions and discounts, if any, or counsel fees or other expenses of the
Selling Shareholders. The Company has agreed to
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<PAGE>
indemnify the Selling Shareholders, their directors, officers, agents and
representatives, and any underwriters, against certain liabilities, including
certain liabilities under the Securities Act. The Selling Shareholders have also
agreed to indemnify the Company, its directors, officers, agents and
representatives against certain liabilities, including certain liabilities under
the Securities Act.
The Selling Shareholders and other persons participating in the
distribution of the Shares offered hereby are subject to the applicable
requirements of Rule 10b-6 promulgated under the Exchange Act in connection with
sales of the Shares.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). As of the date of this
Prospectus, 6,880,958 shares of Common Stock and an aggregate of 358,993 shares
of Preferred Stock were outstanding. The transfer agent for the Common Stock is
American Stock Transfer & Trust Company, New York, New York. The following
summary description of the securities of the Company is qualified in its
entirety by the warrant agreement.
COMMON STOCK
Each share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of the shareholders. The holders of Common Stock are
entitled to receive dividends, when, as and if declared by the Board of
Directors, in its discretion, from funds legally available therefor. Upon
liquidation or dissolution of the Company, the holders of Common Stock are
entitled to share ratably in the assets of the Company, if any, legally
available for distribution to shareholders after the payment of all debts and
liabilities of the Company and the liquidation preference of any outstanding
shares of the Company's Preferred Stock. The Common Stock has no preemptive
rights and no subscription, redemption or conversion privileges. The Common
Stock does not have cumulative voting rights, which means that the holders of a
majority of the outstanding shares of Common Stock voting for the election of
directors will be able to elect all members of the Board of Directors. A
majority vote will also be sufficient for other actions that require the vote or
concurrence of shareholders. All of the outstanding shares of Common Stock are,
and the shares to be sold in this Offering will be, when issued and paid for,
fully paid and nonassessable.
PREFERRED STOCK
GENERAL. The Board of Directors has the authority to issue up to
1,000,000 shares of Preferred Stock in one or more series and to fix the number
of shares constituting any such series, the voting powers, designations,
preferences and relative participation, optional or other special rights and
qualifications, limitations or restrictions thereof, including the dividend
rights and dividend rate, terms of redemption (including sinking fund
provisions), redemption price or
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<PAGE>
prices, conversion rights and liquidation preferences of the shares constituting
any series, without any further vote or action by the shareholders. The issuance
of Preferred Stock by the Board of Directors could affect the rights of the
holders of Common Stock. For example, such issuance could result in a class of
securities outstanding that would have preferences with respect to voting rights
and dividends, and in liquidation, over the Common Stock, and could (upon
conversion or otherwise) enjoy all of the rights appurtenant to Common Stock.
SERIES A PREFERRED STOCK. The Company has designated 217,600 shares of
Preferred Stock as the Company's Series A Preferred Stock, and has issued
217,600 shares of such Series A Preferred Stock as of the date of this
Prospectus. The Series A Preferred Stock has a stated value of $6.25 per share
and accrues non-cash dividends, payable quarterly in shares of Common Stock
based on prevailing market prices for the Common Stock. The dividends accrue on
the stated value of the outstanding shares of Series A Preferred Stock at a
variable rate equal to a specified bank prime rate (8.50% as of the date of this
Prospectus). During the two-year period commencing on November 28, 1995, the
Series A Preferred Stock is convertible at the option of the holders into shares
of Common Stock on a one-for-one basis. After the conversion period expires, the
Series A Preferred Stock will be redeemable at the Company's option for $7.1875
per share in cash. The holders of the Series A Preferred Stock will be entitled
to vote together with the holders of Common Stock on all matters, with each
share of Series A Preferred Stock having one vote. The Series A Preferred Stock
will have a liquidation preference of $7.1825 per share over the Common Stock.
The Company and certain holders of Common Stock (Mitchell Rubenstein, Laurie S.
Silvers, Asbury Park Press, Inc. and Martin H. Greenberg) agreed in connection
with the sale of the Series A Preferred Stock that the Company shall appoint one
nominee of Tekno Simon, LLC ("Tekno Simon"), the holder of all outstanding
shares of the Series A Preferred Stock, to the Company's Board of Directors and
that such shareholders shall vote their shares for election of such nominee to
the Company's Board of Directors. Such holder's current nominee on the Board is
Deborah J. Simon, who was appointed to the Board in November 1996.
SERIES B PREFERRED STOCK. The Company has designated 142,223 shares of
Preferred Stock as its Series B Variable Rate Convertible Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock"). On October 16, 1996, the
Company entered into an amendment to the stock purchase agreement dated November
8, 1995, between the Company and Tekno Simon, regarding the sale of the Series A
Preferred Stock, whereby Tekno Simon agreed to purchase shares of Series B
Preferred Stock, instead of additional shares of Series A Preferred Stock as
originally provided by the agreement. The terms of the Series B Preferred Stock
are identical to those of the Series A Preferred Stock, except that the purchase
price per share of the Series B Preferred Stock was subject to adjustment upon
completion of all of the funding under the amended stock purchase agreement,
based on the market prices of the Common Stock at the time of each such funding,
but in no event shall the purchase price be greater than $6.25 per share or less
than $4.50 per share. As of the date hereof, all of the fundings under the
amended stock purchase agreement have been completed, and 121,393 shares of
Series B Preferred Stock have been issued to Tekno Simon, based upon an adjusted
purchase price of $5.27 per share.
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<PAGE>
SERIES C PREFERRED STOCK. The Company has designated 100,000 shares of
the Company's Preferred Stock as 4% $100 Series C Convertible Preferred Stock
(the "Series C Preferred Stock") and 20,000 of such shares were sold in a
December 1996 private placement to a single accredited strategic investor. The
Series C Preferred Stock pays quarterly cash dividends at the annual rate of 4%
and is convertible into shares of Common Stock based on an initial conversion
price of 110% of the market price of the Common Stock on the date of the
transaction (resulting in an initial conversion price of $6.325), subject to
certain adjustments. The Series C Preferred Stock will have a liquidation
preference of $100 per share over the Common Stock. The Series C Preferred Stock
ranks junior to the Series A Preferred Stock and Series B Preferred Stock as to
payment of dividends and liquidation rights. Each share of Series C Preferred
Stock is entitled to one vote per share, together with the holders of shares of
the Company's Common Stock, Series A Preferred Stock and Series B Preferred
Stock, as a single class on all matters presented to a vote of the Company's
shareholders, except as otherwise expressly required by law.
CONVERTIBLE DEBENTURE
The Company has issued the Convertible Debenture to a single investor.
Interest accrues on the Convertible Debenture at the rate of 4% per annum on the
outstanding principal from the date of initial issuance until payment in full of
the principal amount or conversation of the Convertible Debenture. The Company
has the right to redeem the Convertible Debenture for the sum of 125% of the
unpaid principal and any accrued or unpaid interest. The Convertible Debenture
is convertible as follows: (i) up to 25% of the principal amount is convertible
after the effective date (the "Effective Date") of this registration statement;
(ii) up to 50% of the principal amount is convertible after 30 days from the
Effective Date; (iii) up to 75% of the principal amount is convertible after 60
days from the Effective Date; and (iv) up to 100% of the principal amount is
convertible after 90 days from the Effective Date.
CERTAIN ANTI-TAKEOVER EFFECTS
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority vote of a
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law and the Company's Articles of Incorporation also
authorize the Company to indemnify the Company's directors, officers, employees
and agents. Pursuant to such authorization, the Company has entered into
agreements with each of its directors and certain of its officers providing for
indemnification to the fullest extent permitted by law.
Additionally, the authority possessed by the Board of Directors to
issue Preferred Stock and the Company's Shareholders' Rights Plan described
below could potentially be used to discourage attempts by others to obtain
control of the Company through merger, tender offer, proxy contest or otherwise
by making such attempts more difficult to achieve or more costly. The Board of
Directors may issue Preferred Stock with voting and conversion rights that could
adversely affect the voting power of the holders of Common Stock. Except as
described above,
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<PAGE>
there are no agreements or understandings for the issuance of Preferred Stock
and the Board of Directors has no intention to issue additional series of
Preferred Stock as of the date of this Prospectus.
SHAREHOLDERS' RIGHTS PLAN
The Company has implemented a Shareholders' Rights Plan providing for a
dividend distribution of one Right for each outstanding share of Common Stock.
On August 23, 1996, the Board of Directors declared a dividend of one Right for
each outstanding share of Common Stock, payable on September 4, 1996 to the
shareholders of record on that date. Each Right entitles the holder thereof to
purchase from the Company one share of Common Stock at a price of $25.00 per
share (the "Exercise Price"). The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent, dated as of August 23,
1996.
The Rights will expire 10 years after issuance, unless earlier redeemed
by the Company as provided in the Rights Agreement at a price of $.01 per Right.
The Rights are not currently exercisable and automatically trade together with
the Common Stock.
The Rights, unless earlier redeemed, will become exercisable upon the
occurrence of certain events as defined in the Rights Agreement, which generally
would result in a change in control of the Company or the acquisition of 15% or
more of the Company's Common Stock in transactions not approved by the Board of
Directors prior to consummation thereof. Unless the Rights are earlier redeemed,
in the event that, after the Rights become exercisable, the Company were to be
acquired in a merger or other business combination (in which outstanding shares
of the Company's Common Stock are changed into or exchanged for other securities
or assets) or more than 50% of the assets or earning power of the Company and
its subsidiaries (taken as a whole) were to be sold or transferred in one or a
series of related transactions, the Rights Agreement provides that proper
provision will be made so that each holder of record of a Right will have the
right to receive, upon payment of the Exercise Price, that number of shares of
common stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier redeemed, if a person or group becomes an "acquiring person"
(as defined in the Rights Agreement), the Rights Agreement provides that proper
provision will be made so that each holder of record of a Right, other than such
acquiring person (whose Rights will thereupon become null and void), will
thereafter have the right to receive, upon payment of the Exercise Price, that
number of shares of the Company's Common Stock having a market value at the time
of the transaction equal to two times the Exercise Price.
The number of shares of Common Stock issuable upon exercise of the
Rights and the Exercise Price of the Rights are subject to certain adjustments
as set forth in the Rights Agreement. Until a Right is exercised, the holder, as
such, will have no rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
The Rights will have certain anti-takeover effects by causing
substantial dilution to a person or group that attempts to acquire the Company
in a manner or on terms not approved by the Board of Directors. The Rights,
however, should not deter any prospective offeror willing
-24-
<PAGE>
to negotiate in good faith with the Board of Directors, nor should the Rights
interfere with any merger or other business combination approved by the Board of
Directors.
SHARES ELIGIBLE FOR FUTURE SALE
See "Risk Factors -- Shares Eligible for Future Sale."
LEGAL MATTERS
The validity of the Shares is being passed upon for the Company by
Broad and Cassel, a partnership including professional associations, 201 South
Biscayne Boulevard, Suite 3000, Miami, Florida 33131.
EXPERTS
The financial statements of the Company incorporated by reference in
this Prospectus from the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996 have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in its report with respect thereto,
and is incorporated herein in reliance upon the authority of said firm as
experts in accounting and auditing.
-25-
<PAGE>
====================================== ======================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus in connection with the offering made hereby, and
any information or representation not contained or incorporated herein must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the Shares described in the cover page hereof, or an offer
to sell or a solicitation of an offer to buy the Shares offered hereby in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
----------
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION..............................................3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE.....................................................3
THE COMPANY........................................................4
FORWARD-LOOKING STATEMENTS.........................................9
RISK FACTORS......................................................10
USE OF PROCEEDS...................................................14
SELLING SHAREHOLDERS..............................................15
PLAN OF DISTRIBUTION..............................................20
DESCRIPTION OF CAPITAL STOCK......................................21
LEGAL MATTERS.....................................................25
EXPERTS...........................................................25
1,307,502 Shares
BIG ENTERTAINMENT, INC.
Common Stock
---------------------------------
PROSPECTUS
---------------------------------
__________________, 1997
====================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that its expenses in connection with this
registration statement will be as follows:
Securities and Exchange Commission registration fee........ $ 2,524
Legal fees and expenses.................................... 5,000
Accounting fees and expenses............................... 2,250
Miscellaneous.............................................. 226
----------
Total............................................. $ 10,000
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has authority under Section 607.0850 of the Florida
Business Corporation Act (the "FBCA") to indemnify its directors and officers to
the extent provided for in the FBCA. The Company's Amended and Restated Articles
of Incorporation provide that the Company shall indemnify and may insure its
officers and directors to the fullest extent permitted by law. The Company has
also entered into agreements with each of its directors and executive officers
wherein it has agreed to indemnify each of them to the fullest extent permitted
by law.
The provisions of the FBCA that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of nonmonetary relief will
remain available under Florida law. In addition, each director will continue to
be subject to liability for (a) violations of criminal laws, unless the director
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution, and (d) willful misconduct or conscious disregard for the best
interests of the Company in a proceeding by or in the right of the Company to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder. The statute does not affect a director's responsibilities under any
other law, such as the federal securities laws. The effect of the foregoing is
to require the Company to indemnify the officers and directors of the Company
for any claim arising against such persons in their official capacities if such
person acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission,
II-1
<PAGE>
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
Pursuant to certain registration rights agreements, each of the Company
and the Selling Shareholders has agreed to indemnify the others and their
directors, officers, agents and representatives (and with respect to the
indemnification by the Company, any underwriters) against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
5.1 Opinion of Broad and Cassel.
23.1 Consent of Broad and Cassel (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (see page II-4 of the Registration Statement).
- ----------
ITEM 17. UNDERTAKINGS.
(a) RULE 415 OFFERING. The undersigned Registrant hereby
undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
II-2
<PAGE>
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial BONA
FIDE offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) REQUEST FOR ACCELERATION OF EFFECTIVE DATE. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the 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, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
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 S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on this 17th day of
October, 1997.
BIG ENTERTAINMENT, INC.
By:/S/MITCHELL RUBENSTEIN
----------------------------------
Mitchell Rubenstein
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Mitchell Rubenstein and Laurie S.
Silvers his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
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 indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ MITCHELL RUBENSTEIN Chairman of the Board and Chief October 17, 1997
- ----------------------------------- Executive Officer (principal
MITCHELL RUBENSTEIN executive officer)
/S/ LAURIE S. SILVERS Vice Chairman of the Board and October 17, 1997
- ----------------------------------- President
LAURIE S. SILVERS
/S/ MARCI YUNES Chief Financial Officer October 17, 1997
- ----------------------------------- (principal financial and accounting officer)
MARCI YUNES
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ MARTIN H. GREENBERG Director October 17, 1997
- -----------------------------------
MARTIN H. GREENBERG
/S/ HARRY T. HOFFMAN Director October 17, 1997
- -----------------------------------
HARRY T. HOFFMAN
/S/ LAWRENCE GOULD Director October 17, 1997
- -----------------------------------
LAWRENCE GOULD
/S/ JULES L. PLANGERE, JR. Director October 17, 1997
- -----------------------------------
JULES L. PLANGERE, JR.
/S/ E. DONALD LASS Director October 17, 1997
- -----------------------------------
E. DONALD LASS
/S/ DEBORAH J. SIMON Director October 17, 1997
- -----------------------------------
DEBORAH J. SIMON
/S/ JOHN W. WALLER, III Director October 17, 1997
- -----------------------------------
JOHN W. WALLER, III
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
5.1 Opinion of Broad and Cassel.
23.2 Consent of Arthur Andersen LLP.
BROAD AND CASSEL
ATTORNEYS AT LAW
201 SOUTH BISCAYNE BOULEVARD
MIAMI CENTER, SUITE 3000
MIAMI, FLORIDA 33131
(305) 373-9400
October 17, 1997
Big Entertainment, Inc.
2255 Glades Road, Suite 237 West
Boca Raton, Florida 33431
RE: BIG ENTERTAINMENT, INC. (THE "COMPANY")
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
You have requested our opinion with respect to the shares (the
"Shares") of the Company's common stock, $.01 par value (the "Common Stock"),
included in the Company's registration statement on Form S-3 (the "Registration
Statement"). The Registration Statement is being filed with the U.S. Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), on behalf of certain selling shareholders and certain other
holders of securities of the Company, as named therein.
Capitalized terms used but not otherwise defined herein shall have the
meanings as set forth in the Registration Statement.
As counsel to the Company, we have examined the original or certified
copies of such records of the Company, and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinion, we have relied
upon statements or certificates of officials and representatives of the Company
and others.
Based on, and subject to the foregoing, we are of the opinion that the
issued and outstanding Shares included in the Registration Statement are, and
the Shares underlying the Placement Agent's Warrants, Convertible Debentures and
Debenture Warrants when issued as
<PAGE>
Big Entertainment, Inc.
October 17, 1997
Page 2
described in the Registration Statement, will be, duly and validly issued, fully
paid and non-assessable.
In rendering this opinion, we advise you that members of this Firm are
members of the Bar of the State of Florida, and we express no opinion herein
concerning the applicability or effect of any laws of any other jurisdiction,
except the securities laws of the United States of America referred to herein.
This opinion has been prepared and is to be construed in accordance
with the Report on Standards for Florida Opinions, dated April 8, 1991, issued
by the Business Law Section of The Florida Bar, as amended (the "Report"). The
Report is incorporated by reference into this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the section
captioned "Legal Matters" in the Prospectus constituting part of the
Registration Statement. In giving such consent, we do not thereby admit that we
are included within the category of persons whose consent is required under
Section 7 of the Securities Act, or the rules and regulations promulgated
thereunder.
Very truly yours,
/s/ BROAD AND CASSEL
- ------------------------
Broad and Cassel
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Form S-3 registration statement of our report
dated February 28, 1997 included in Big Entertainment, Inc.'s Form 10-KSB for
the year ended December 31, 1996 and to all references to our Firm included in
this registration statement.
/s/ ARTHUR ANDERSEN LLP
- ------------------------
Arthur Andersen LLP
Miami, Florida,
October 16, 1997.
