As filed with the Securities and Exchange Commission on January 15, 1998
Registration No. 333-38219
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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
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(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.
NINA S. GORDON, P.A.
BROAD AND CASSEL
201 SOUTH BISCAYNE BOULEVARD, SUITE 3000
MIAMI, FLORIDA 33131
TELEPHONE NO. (305) 373-9400
FACSIMILE NO. (305) 373-9443
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
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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]
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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. [_]
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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.
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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 JANUARY 15, 1998
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 $702,000 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 January 12, 1998, the last reported sales price of the
Common Stock on the Nasdaq SmallCap Market was $5.91 per share.
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<PAGE>
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
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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.
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THE DATE OF THIS PROSPECTUS IS JANUARY __, 1998
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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, and the
Quarterly Report on Form 10-QSB and Amendment No. 1 thereto on
Form 10-QSB/A for the fiscal quarter ended September 30, 1997.
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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 involved in
the licensing of entertainment properties, the operation of
entertainment-related retail stotes, and the publishing and packaging of books.
The Company, either directly or in some cases through its 50% ownership
interest in NetCo Partners ("NetCo Partners"), owns exclusive rights to certain
original characters and concepts created by best-selling authors and media
celebrities, including, for example, Tom Clancy, Magic Johnson, Leonard Nimoy,
Gene Roddenberry, Mickey Spillane, Arthur C. Clarke, John Jakes, Anne McCaffrey,
Margaret Weis and Isaac Asimov. The Company frequently uses illustrated novels
to introduce and develop new characters and concepts (collectively, its
"intellectual properties") 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 that sell entertainment-related merchandise.
The Company's intellectual properties currently include, among others:
LEONARD NIMOY'S PRIMORTALS; 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; MARGARET WEIS' TESTAMENT OF
THE DRAGON; NEIL GAIMAN'S MR. HERO -- THE NEWMATIC MAN; NEIL GAIMAN'S
TEKNOPHAGE; NEIL GAIMAN'S LADY JUSTICE; AND NEIL GAIMAN'S WHEEL
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OF WORLDS. A more detailed summary of these intellectual properties is
set forth in " - Intellectual Properties" below.
The Company, in conjunction with its majority-owned subsidiary, Tekno
Books has also entered into an agreement with June Bug Enterprises, Inc., an
entity controlled by pro basketball star Magic Johnson. Under the agreement,
Magic Johnson will work with the Company to develop textbooks, children's books,
novels and action figure cartoon characters.
The Company is continually negotiating with other best-selling authors
and 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 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.
NETCO PARTNERS
Certain intellectual properties are owned by NetCo Partners, a joint
venture owned 50% by the Company and 50% by C.P. Group, Inc. ("C.P. Group"). Tom
Clancy owns 50% of C.P. Group. NetCo Partners properties currently include TOM
CLANCY'S NETFORCE, ARTHUR C. CLARKE'S CRIOSPHINX, TAD WILLIAMS' MIRROR WORLD,
CATHY CASH SPELLMAN'S MILLENNIUM, NEIL GAIMAN'S LIFERS and ANNE MCCAFFREY'S
SARABAND.
The Company and C.P. Group are each 50% partners in NetCo Partners.
C.P. Group contributed to NetCo Partners all rights to TOM CLANCY'S NETFORCE,
and the Company contributed to NetCo Partners all rights to TAD WILLIAMS' MIRROR
WORLD, ARTHUR C. CLARKE'S CRIOSPHINX, NEIL GAIMAN'S LIFERS, and ANNE MCCAFFREY'S
SARABOND. Although pursuant to the NetCo joint venture agreement (the "NetCo
Agreement") the Company is not obligated to contribute any additional properties
to NetCo Partners, the Company and C.P. Group are working together to obtain
rights from third parties to additional entertainment properties for the NetCo
Partners joint venture. For example, the Company and C.P. Group jointly
negotiated a contract with author Cathy Cash Spellman granting to NetCo Partners
all rights to CATHY CASH SPELLMAN'S MILLENNIUM.
Pursuant to the terms of the NetCo Agreement, the Company is
responsibile for developing, producing, manufacturing, advertising,
promoting,marketing and distributing NetCo Partners' illustrated novels and
related products and for advancing all costs incurred in
<PAGE>
connection therewith. All amounts advanced by the Company to fund NetCo
Partners' operations are treated as capital contributions of the Company and the
Company is entitled to a return of such capital contributions before
distributions of cash flow are split equally between the Company and C.P. Group.
The NetCo Agreement provides for an intital term (the "Development Term") of
five years, during which the partners will jointly develop the contributed
properties. The Development Term may be extended by the mutual consent of the
partners and shall terminate upon 30 days' notice to the Company by C.P. Group
should Mitchell Rubenstein cease to be Chief Executive Officer of the Company
and Laurie S. Silvers cease to be the President of the Company. Upon termination
of the Development Term, any undeveloped properties (excluding TOM CLANCY'S
NETFORCE) are to be returned to their respective contributing partner and any
properties in development or already developed are to be properties of the joint
venture, which shall continue until, among other things, the partners elect to
dissolve the joint venture.
THE COMPANY'S OPERATING DIVISIONS
During 1997, the Company consolidated its operating divisions into two
current divisions: the intellectual property division and the entertainment
retail division. The intellectual property division is currently further
segmented into three subdivisions -- publishing, licensing, and book licensing
and packaging. During 1997, the Company refocused its operations away from comic
book publishing, which will result in that subdivision's eventual phase out. For
the nine months ended September 30, 1997, the percentage of the Company's net
revenues contributed by each of the current operating divisions was as follows:
licensing division, 2.5%; book licensing and packaging division, 22.9%; and
entertainment retail division, 73.7%. Due to the Company's shift in focus
during 1997, the publishing division contributed less than 1% of the Company's
net revenues for the nine months ended September 30, 1997.
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 three Big Entertainment in-line studio stores and 28 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.
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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.
INTELLECTUAL PROPERTIES
The Company's and NetCo Partners' 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 intellectual properties, which are currently owned either directly
by the Company or through NetCo Partners, include some of the following:
/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 NetCo Partners property): 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 POLITIKA, 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.
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/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 (a NetCo Partners property): 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 (a NetCo Partners property):
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
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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) (a NetCo
Partners property): 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.
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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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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 $3,249,323 for
the nine months ended September 30, 1997. The Company had accumulated deficits
of $21,992,633 and $25,407,639 at December 31, 1996 and September 30, 1997,
respectively.
The Company has made several modifications to its initial business plan
in an effort to reverse the losses that have been sustained since its inception.
During 1997, the Company stopped publishing comic books, an activity that
required a substantial amount of resources and had not proven to be profitable.
Essentially all of the overhead associated with comic book publishing has been
eliminated effective with the second quarter of 1997. At the same time, the
Company decided to expand its retail operations and has initiated this expansion
with the development of three prototype in-line retail stores. Substantial
resources were devoted to the development of three protoptype in-line stores
which opened in the fourth quarter of 1997, including professional fees and
expenses incurred to design the new stores, the hiring of additional field and
administrative personnel, the selection and acquisition of new hardware and
software for a new retail accounting and merchandising system to be implemented,
and the capital expenditures for the new stores. In addition, the Company
continues to acquire and develop its base of intellectual properties, and to
negotiate additional licensing agreements thereon, which while not capital
intensive, requires a substantial amount of time from its senior executives.
While the Company believes that these measures will ultimately reverse its
operating losses, there can be no assurances that the revenues generated by the
intellectual property and retail divisions will be sufficient to offset the
associated expenses incurred.
AVAILABILITY OF CASH AND WORKING CAPITAL. The Company's cash and cash
equivalents at December 31, 1996 and September 30, 1997 totaled $1,675,852 and
$1,569,375, respectively. The Company had working capital of $1,285,093 and
$1,852,786 at December 31, 1996 and September 30, 1997, respectively. 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 nine months ended September 30, 1997, the Company used $4,616,337 of
cash to fund its operating activities and incurred a net loss of $3,249,323
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 received 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, absent the Company's plans to expand its
in-line studio stores (see"--Retail Operations," below), 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
for approximately the next 12 months. 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.
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<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 has increased the number of its retail kiosks at a moderate pace, adding
10 new units in 1995, 10 new units in 1996 and five new units in 1997. These new
units coupled with the addition of three new in-line studio stores have
necessitated that the Company incur additional operating and administrative
expenses in conjunction with its retail operations. 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. The Company plans to
evaluate the results of its retail store expansion (particularly the new in-line
store concept) and to make modifications and/or curtail operating and
administrative costs where appropriate. 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 of which $500,000 per
policy has been pledged to one of the Company's senior creditors.. 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 949,063
shares of Common Stock, warrants to purchase an aggregate of 759,996 shares of
Common Stock,
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<PAGE>
20,000 shares of Series C Preferred Stock convertible into 316,205 shares of
Common Stock and the Convertible Debenture convertible into 136,698 shares of
Common Stock based on the conversion price that would be applicable if converted
on January 14, 1998. 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 $702,000 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 $20,250.
-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 *
3050 Champion Boulevard
Boca Raton, FL 33496
Paul R. 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
Barington 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>
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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>
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 - V.P. 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>
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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>
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, IL 60010
David Kohane, D.M.D................ 21,429 * 21,429 0 *
333 West 86th Street
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>
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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>
John Lilley......................... 7,143 * 7,143 0 *
Heath House
Lynn Road
Hillington
Kings Lynn Norfolk
England PE316B2
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 06810
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 H. Reinhart................... 14,286 * 14,286 0 *
8900 Brennan Road
Richmond, VA 23229
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, FL 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 *
6860 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, England
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 *
1171 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 Street
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 $20,250, 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, 6,896,340 shares of Common Stock and an aggregate of 359,546 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). The Series A Preferred Stock is 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 122,846 shares of
Series B Preferred Stock have been issued to Tekno Simon, based upon an adjusted
purchase price of $5.21 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.
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<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........................................10
RISK FACTORS......................................................11
USE OF PROCEEDS...................................................15
SELLING SHAREHOLDERS..............................................16
PLAN OF DISTRIBUTION..............................................21
DESCRIPTION OF CAPITAL STOCK......................................22
LEGAL MATTERS.....................................................26
EXPERTS...........................................................26
1,307,502 Shares
BIG ENTERTAINMENT, INC.
Common Stock
---------------------------------
PROSPECTUS
---------------------------------
__________________, 1998
====================================== ======================================
<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.................................... 10,000
Accounting fees and expenses............................... 7,500
Miscellaneous.............................................. 226
----------
Total............................................. $ 20,250
==========
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.(A)
23.1 Consent of Broad and Cassel (included in Exhibit 5.1 hereto).(A)
23.2 Consent of Arthur Andersen LLP.(B)
24.1 Power of Attorney (see page II-4 of the Registration Statement).(A)
- ----------
(A) Previously filed.
(B) Filed herewith.
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.
(c) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securites Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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 14th day of
January, 1998.
BIG ENTERTAINMENT, INC.
By:/S/MITCHELL RUBENSTEIN
----------------------------------
Mitchell Rubenstein
Chairman of the Board and
Chief Executive Officer
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 January 14, 1998
- ----------------------------------- Executive Officer (Principal
MITCHELL RUBENSTEIN executive officer)
* Vice Chairman of the Board and January 14, 1998
- ----------------------------------- President
LAURIE S. SILVERS
* Chief Financial Officer January 14, 1998
- ----------------------------------- (Principal financial and accounting officer)
MARCI YUNES
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Director January 14, 1998
- -----------------------------------
MARTIN H. GREENBERG
* Director January 14, 1998
- -----------------------------------
HARRY T. HOFFMAN
* Director January 14, 1998
- -----------------------------------
LAWRENCE GOULD
* Director January 14, 1998
- -----------------------------------
JULES L. PLANGERE, JR.
* Director January 14, 1998
- -----------------------------------
E. DONALD LASS
* Director January 14, 1998
- -----------------------------------
DEBORAH J. SIMON
</TABLE>
* By: /s/ MITCHELL RUBENSTEIN
- -----------------------------------
MITCHELL RUBENSTEIN, AS ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
23.2 Consent of Arthur Andersen LLP.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Form S-3/A 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,
January 13, 1998.
