UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Dynamic Media, Inc.
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(Exact name of small business issuer in its charter)
Florida 7379 65-0643950
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
2000 Hamilton Street: Suite 596, Philadelphia, PA 19130 800-700-0295
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(Address and telephone number of principal executive offices)
2000 Hamilton Street: Suite 596, Philadelphia, PA 19130
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(Address of principal place of business or intended principal place of business)
Ian D. Jones, 2000 Hamilton Street, Suite 596, Philadelphia, PA 19130
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(Name, Address and telephone number of agent for service)
COPIES TO:
Terry R. Fields, Esquire, 2200 Benjamin Franklin Parkway, E105a,
Philadelphia, PA 19130 Tel:(215)-981-1011
Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any 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, check the following box. [X]
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, checks the following box and list the
Securities Act Registration statement number of the earlier effective
registration statement for the same offering. [ ]__________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under The Securities Act, check the following box and list the Securities
Act Registration statement number of the earlier effective registration
statement for the same offering. [ ]___________________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. [ ]_________________
be registered registered per unit price .00025%
Total Number of Pages ___
Exhibit List - Page ___
Note: Specific details relating to the fee calculation shall be furnished in
notes to the table, including references to provisions of Rule 457 (Section
230.457 of this chapter) relied upon, if the basis of the calculation is not
otherwise evident from the information presented in the table. If the filing fee
is calculated pursuant to Rule 457(o) under the Securities Act, only the title
of the class of securities to be registered, the proposed maximum aggregate
offering price for that class of securities and the amount of registration fee
need to appear in the Calculation of Registration Fee table. Any difference
between the dollar amount of securities registered for such offerings and the
dollar amount of securities sold may be carried forward on a future registration
statement pursuant to Rule 429 under the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or amendment. These
securities may not be sold nor may offers to purchase be accepted prior to the
date of the final Offering Circular. This Preliminary Offering Circular shall
not constitute an offer to sell or the solicitation of an offer to purchase nor
shall there be any sale of these securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
DYNAMIC MEDIA, INC.
PRELIMINARY PROSPECTUS DATED: JULY 10, 2001
CALCULATION OF REGISTRATION FEE
Common Stock 2,200,000 $2.00 $4,400,000 $1,100
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Title of each Share Proposed Proposed maximum Amount of
class of amount to maximum aggregate registration
securities to be offering price offering fee
2,200,000 SHARES OF COMMON STOCK
SHARES OFFERED TO THE PUBLIC IS $2.00.
We are selling up to a maximum of 2,200,000 shares of Common Stock ("Shares"),
which have a par value of $.001 per share (the "Common Stock") which represents
18% of the total outstanding shares based on the maximum amount of the offering.
We are a Florida corporation. We have fixed the price of all the shares made in
this offering at $2.00 each.
The Shares are being offered on a best efforts basis and the Company has the
right to immediately utilize the funds received from investors. There is no
minimum offering. Accordingly, as shares are sold we will use the money raised
for our activities. The offering will remain open until October,31 2001.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. SEE THE CAPTION "RISK FACTORS" COMMENCING ON PAGE 7.
PER SHARE TOTAL
Public offering price $ 2.00 $ 4,400,000
Underwriting discounts and commissions .18 400,000
Proceeds, before expenses, to us $ 1.82 $ 4,000,000
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 10, 2001
DYNAMIC MEDIA, INC.
TABLE OF CONTENTS
Summary.................................................................. 5
Our Company.............................................................. 5
The Offering............................................................. 6
Risk Factors............................................................. 7
Capitalization........................................................... 9
Dilution................................................................. 11
Use of Proceeds.......................................................... 10
Determination of Offering Price.......................................... 10
Plan of Distribution..................................................... 13
Management Discussion of Analysis of Financial Condition
and Results of Operations.............................................. 14
Year 2000 Readiness Disclosure........................................... 17
Recent Events............................................................ 15
Business................................................................. 22
Principal Shareholders................................................... 21
Management............................................................... 21
Certain Transactions..................................................... 24
Description of Securities................................................ 27
Shares Eligible for Future Sale.......................................... 27
Available Information.................................................... 28
Dividend Policy.......................................................... 29
Stock Transfer Agent..................................................... 29
Experts.................................................................. 30
Legal Matters............................................................ 30
Financial Statements..................................................... F 1-18
SUMMARY
The items in the following summary are described in more detail later
in this prospectus. This summary provides an overview of selected information
and does not contain all the information you should consider. Therefore, you
should also read the more detailed information contained in this prospectus,
including the financial statements and related notes.
Our Company
We were formerly known as Dynamic Imaging Systems Corporation and
before that as Brickell Foreclosure Properties, Inc., and were organized under
the laws of the state of Florida in 1996. Our Common Stock is currently listed
Over the Counter (OTC) under the trading symbol "DYMI". Our strategy is to
capitalize on the market opportunities created by the popularity of interactive
DVDs including entertainment and education. Our focus is on the development and
marketing of effective interactive DVD programs that improve teaching and
learning and provide next generation DVD entertainment.
We are paving the way with new multimedia and interactive DVD ideas
that work...Ideas that produce high earnings and extraordinary growth by staying
ahead of digital technologies with proprietary DVD solutions. We will customize
instruction and allow for individualized learning at home so that students at
home, young and old, can achieve success at their own pace and level.
The phenomenal success being experienced by the DVD industry has been
primarily due to the embracement of this technology by Hollywood studios. With
almost 10,000 movies currently available on DVD at virtually every movie rental
store and electronic retail outlet, its no wonder that by and large, the public
equates DVD with movies.
The original developers of DVD planned for the technology to be used
for far more applications than just a better medium for a movie. Since 1998,
video industry analysts have been predicting that the largest growth
opportunities for the new medium would be in interactive entertainment,
education, and training. We believe that these predictions are valid. Its easy
to see how DVD can be applied to these growth areas, given its portable, cross
platform, and multi language nature, and the incredible capacity and interactive
capabilities that the format supports.
Dynamic Media, Inc. stands with only a few companies in the world who
have experimented with and produced commercially available DVD titles that tap
into the extreme interactivity that would be required to make DVD work with
advanced entertainment, educational applications and interactive games. We
designed and produced "Sherlock Holmes - Consulting Detective" on DVD in 1999.
Subsequently, this title has garnished three worldwide awards for the
accomplishment. Even today, this title is one of only a handful of DVDs on the
market that are as amazingly complex and interactive as the format allows.
"Sherlock" contains over 1700 menus with more than 5000 buttons. It is a video
based game that keeps track of your score and allows you to "save" and "restore"
the game and allows the player to pick up at a later date where they left off.
Every DVD-Video player is a small self-contained computer. Dynamic
Media, Inc. and its founders have been a part of the computer industry for more
than twenty years and thoroughly understood the implications that were being
presented with the DVD format. This is how we were so quickly able to master the
DVD programming capabilities that allowed us to produce "Sherlock". We have a
3-year lead on most DVD production companies, and most of them still do not
understand the possibilities. We do.
To implement DVD for the growth areas, this extreme programming is
required, and we have been accomplishing it for more three years. We are ready
to tap into the growth areas immediately with advanced entertainment, personal
educational and instructional titles.
The digital video communication industry is the most rapidly growing
business in the world. In the year 2000, annual sales encompassed over $28
billion dollars a year, with sales increasing exponentially, annually.
We see that as simply just the beginning of the growth. Last year, 183
million discs were sold and for the next sixty months, the number is expected to
climb by approximately 140 million annually and 870 million discs per year by
2005.
Already the fastest growing consumer electronics product in history,
DVD-Player sales will reach new heights over the next several years and will
exceed 60 million units in 2004. New features such as DVD-Audio, component
integration leading to lower prices, and new products incorporating DVD
technology such as TV/DVDs and DVD mini-systems all point to rapid market
growth-a 48% increase in U.S. shipments in 2001 alone.
We see those DVD disc sales far exceeding the VHS 1998 peak of 657
million tapes sold that year. The highest number ever sold being only 757
million.
Dynamic Media, Inc., is in an active expansion phase to take advantage
of these remarkable digital multimedia advancements.
5
THE OFFERING
Common Stock Offered
for sale hereby Up to a maximum of 2,200,000 shares of Common Stock is being
sold by us. The holders of our Shares are entitled to one vote
per share of Common Stock on all matters submitted to a vote of
our stockholders and to receive dividends when and if declared
by our Board of Directors from funds legally available for that
purpose. See Risk Factors-No Dividends and None Anticipated.
Upon our liquidation, dissolution or winding up holders of our
shares of Common Stock are entitled to share in the
distribution of all assets remaining after payment of all
debts. Holders of our shares of Common Stock do not have
cumulative voting rights or preemptive, subscription or
conversion rights. The shares of our Common Stock presently
outstanding are, and the shares of our Common Stock offered
hereby will be, upon issuance and payment therefore, validly
issued, fully paid and non-accessible.
Offering Price $2.00 per share of Common Stock. The Shares are being offered
on a best efforts basis and the Company has the right to
immediately utilize the funds received from investors.
Terms of the Offering There is no minimum offering. Accordingly, as shares are sold
we will use the money raised for our activities. The offering
will remain open until October,31 2001, unless we decide to
terminate the selling efforts prior to this date. The minimum
subscription is 250 Shares and the maximum subscription is
100,000 Shares.
AUTHORIZED AND
OUTSTANDING SHARES
COMMON OF STOCK
Authorized 20,000,000 shares
Outstanding: 9,718,855 shares Prior to offering
11,918,855 shares After maximum offering
USE OF NET PROCEEDS Assuming that the entire offering will be sold, then up to the
first $400,000 that we raise will be used to pay the expenses
of the offering. If a lesser amount is sold this sum will be in
proportion to the amount raised. The priority for funds raised
in excess of that amount will be applied in the following order
(i) repayment of debt; (ii) to implement completed research and
development projects; and (iii) to augment working capital. See
Use of Proceeds. There is no minimum offering or escrow of
shareowners funds. See Plan of Distribution.
6
RISK FACTORS
The securities offered hereby are highly speculative and involve substantial
risks. Prospective investors should carefully consider the following risk
factors before making an investment decision.
WE HAVE UNCERTAIN PROFITABILITY DUE TO A LIMITED OPERATING HISTORY, A HISTORY OF
LOSSES, EXPECTATION OF FUTURE LOSSES AND A GOING CONCERN QUALIFICATION BY OUR
INDEPENDENT ACCOUNTANTS.
We were formed on February 14, 1996, and therefore have only a limited operating
history upon which an evaluation of our prospects can be made. Such prospects
must be considered in light of the substantial risk, expenses and difficulties
encountered by new entrants into the Internet services industry. We have
incurred losses from inception through March 31, 2001 in the amount of
($7,292,906). Our independent accountants have issued a going concern
qualification based on their audit of our financial statements. We expect to
continue to incur net losses as we continue to expend substantial resources on
sales, marketing and administration, and the development of our products. We do
not anticipate operating net income until the end of the third quarter of the
year 2001. In addition, we currently intend to increase our capital expenditures
and operating expenses in order to expand our network to support additional
expected subscribers in existing and future markets and to market and provide
services to a growing number of potential subscribers. There can be no assurance
that we will achieve or sustain profitability or positive cash flow from our
operations.
We expect to have future additional capital requirements. This is based on our
current business plan which has included a planned and significant decrease in
FY 2000, in government contracts because of the nature and limitations of
government work.
Our future capital requirements will depend on numerous factors, including the
rate of market acceptance of our products and services, our ability to maintain
and expand our customer base, the ability to acquire quality content for DVD
publishing, the rate of expansion of our network QuickTV dealerships, the level
of resources required to expand our market and distributor organization,
information systems and research and development activities, the pricing and
timing of nationwide dealer expansion, the availability of hardware and software
provided by third party venders and other factors. The timing and amount of such
capital requirements cannot be accurately predicted. If capital requirements
vary materially from those currently planned, or if we are unable to sell the
entire amount of the Offering, we may require additional financing sooner than
anticipated. We have no commitments for any additional financing, and there can
be no assurance that any such commitments can be obtained on favorable terms, if
at all.
Any additional equity financing may be dilutive to our shareholders, and debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising future capital and other financial and operational matters.
If we are unable to obtain additional financing as needed, we may be required to
reduce the scope of our operations or our anticipated expansion, which could
have a material adverse effect on our business, operating results and financial
condition.
We expect to have competition some of which might be substantial.
Our capital requirements depend on numerous factors, including the rate of
market acceptance of our products and services, our ability to maintain and
expand our customer base, the rate of expansion of our infrastructure and the
level of resources required to expand our market. The lack of adequate funding
may adversely affect our ability to meet our short-term objectives. We will
require additional financing to expand our sales, maintain public awareness of
our services and provide working capital for our anticipated growth. The timing
and amount of such capital requirements cannot be accurately predicted. If
capital requirements vary materially from those currently planned, or if we are
unable to sell the entire amount of the offering, we may require additional
financing sooner than anticipated. The lack of additional financing may
adversely affect our ability to meet our objectives.
Any additional equity financing may be dilutive to our shareholders, and debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising future capital and other financial and operational matters.
If we are unable to obtain additional financing as needed, we may be required to
reduce the scope of our operations or our anticipated expansion, which could
have a material adverse effect on our business, operating results and financial
condition.
7
Our officers and directors have limited liability.
Our Certificate of Incorporation and By-Laws provide that a directors liability
to the Company for monetary damages will be limited. In addition, we are
obligated under the Certificate of Incorporation and By-Laws to indemnify our
directors and officers against certain liabilities incurred with their service
in such capacities. We will execute indemnification agreements which will
indemnify each Director and officer against certain liabilities which they may
incur. Each of these measures could reduce the legal remedies available to us
and the shareholders against such individuals.
There is a risk that we may have a liability that is not covered by insurance.
Although we carry general liability insurance, our insurance may not cover
certain potential claims or may not be adequate to indemnify us for all
liability that may be imposed. Any imposition of liability that is not covered
by insurance or is in excess of insurance coverage could have a material adverse
effect on our business, operating results and financial condition. Although we
are careful, there may be security risks to our proprietary information and
data.
Despite the implementation of security measures, our networks may be vulnerable
to unauthorized access, computer viruses and other disruptive problems.
Companies have in the past experienced, and may in the future experience,
interruptions in service as a result of the accidental or intentional actions of
users.
We have not paid any dividends and in the foreseeable future we expect that
there will be a lack of dividends.
To date, we have not paid any dividends. We are not currently restricted from
paying cash dividends. We presently plan to reinvest earnings in order to
finance the expansion and development of our business, and it is therefore
unlikely that any cash dividends will be declared in the foreseeable future.
We have used our own attorney to draw all the documents with respect to this
offering and no separate investors counsel was retained by us.
We have not retained any independent professionals to review or comment on this
offering or otherwise protect the interest of the investors hereunder. Although
we have retained our own counsel, neither such firm, nor any other firm has
made, on behalf of the investors, any independent examination of any factual
matters represented by management, herein, and purchasers of the shares should
not rely on the firm so retained with respect to any matters herein described.
There is no underwriter for this offering and we are relying on best efforts of
ourselves.
There is no underwriter for this offering, therefore, offerees will not have the
benefit of an underwriters due diligence efforts which would typically include
the underwriter to be involved in the preparation of disclosure and the pricing
of the common stock offered hereby, among other matters. As we have never
engaged in the public sale of our common stock, we have no experience in the
underwriting of any such offering. Accordingly, there is no prior experience
from which investors may judge our ability to consummate this offering. In
addition, the common stock is being offered on a best efforts basis.
Accordingly, there can be no assurances as to the number of shares that may be
sold or the amount of capital that may be raised pursuant to this offering.
8
We have a potential for possible delisting of securities and there are risks
relating to low-priced stocks which may affect us.
It is currently anticipated that our common stock will be eligible for listing
upon the completion of this offering. If we are not listed, an investor could
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of our securities. In addition, if the trading price of the common
stock is below $5.00 per share, trading in such securities would also be subject
to the requirements of certain rules promulgated under the Securities Exchange
Act of 1934, as amended (the Exchange Act), which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchasers written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in our securities, which could
severely limit the market price and liquidity of such securities and the ability
of purchasers in this offering to sell their securities in the secondary market.
Disclosure is also required to be made about commissions payable to both the
Broker/Dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing penny stock restrictions will not apply to our securities
if such securities are listed on the NASDAQ National Market System or are
otherwise listed on the regional NASDAQ System and have certain price and buying
information provided on a current and continuing basis or meet certain minimum
net tangible assets or average revenue criteria. If we are successful in raising
at least $4 million, now, or at some time in the future, our securities would
qualify for the exemptions from the penny stock restrictions. Otherwise we will
remain subject to Section 15(b)(6) of the Exchange Act governing these penny
stock restrictions. If our securities were subject to the existing rules on
penny stocks, the market liquidity for our securities could be adversely
affected.
THERE ARE CONSIDERABLE RISKS IN RELYING ON AND RELATING TO OUR BUSINESS PLAN
STRATEGY, HOWEVER, THERE CAN BE NO ASSURANCE THAT WE WILL SUCCESSFULLY PROCEED
OR EXPAND ON FAVORABLE TERMS IN THE FUTURE.
EVEN AFTER THE OFFERING IS SOLD, CONTROL WILL BE MAINTAINED BY THE CURRENT
STOCKHOLDERS, AND INVESTORS WILL HAVE TO RELY ON SENIOR MANAGEMENT FOR ALL
DECISIONS BECAUSE OF THIS CONTROL.
9
USE OF PROCEEDS
We are seeking a new investment through this offering to finance and
expand our current operations immediately. Achieving this goal and objective
includes producing and creating our own content so that we own our proprietary
and published interactive DVDs and distribute them worldwide, and, in addition,
create a network of nationwide QuickTV support centers to enhance our potential
growth and sales of our products and services. To accomplish this goal, we need
to raise $2,200,000, which is the basis of our minimum cash offering. If we are
unable to raise these minimum funds, we will modify our present primary plan as
presently contemplated by management in accordance with funds received. If the
minimum amount required is not raised, we intend to reduce research and
development expenditures and if necessary obtain new funding with the aid of
financial experts that are available to us.
The maximum net proceeds from this offering may be as high as $ 4,000,000
in cash. If we are unable to sell all of the shares offered, the net proceeds
would be lower.
In the table below, we have detailed the minimum amount of capital required
for us to operate our business as currently planned. In addition, we have
outlined in order of priority , the manner in which we have available use of the
funds raised, assuming that we sell all of the shares offered. The net proceeds
we would receive from the issuance of all the 2,200,000 shares by this offering
are estimated to be approximately $4,000,000. For lesser percentages of shares
sold see the table following. The table also shows how we will use the proceeds
of the offering.
Dynamic Media, Inc.
Minimum Amount Maximum Amount
Required Required
-------------- --------------
Proceeds from the Offering $2,000,000 $4,000,000
Use of Proceeds:
Research and Development $ 100,000 $ 300,000
Office and Equipment 50,000 100,000
Marketing, Advertisement
& Promotion 250,000 500,000
Project/Content Development 750,000 1,200,000
Working Capital,
Operating Expenses 850,000 1,900,000
---------- ----------
Total of Proceeds $2,000,000 $4,000,000
The table above contains amounts of proceeds to be used for general working
capital needs, such as salaries, rent and utilities, or such amounts may be used
to build up inventory levels of supplies used in the creation of digital media.
10
Determination of Offering Price
Although there is an established public market for the common equity
being registered there is a significant difference between the offering price
and the market price of $ .10, as quoted in the Pink Sheets, of the stock. In
fact, the present market cap on our stock (number of issued shares times the
stock price per share) is less than $ 1,000,000. Factors that went into
establishing a $ 2.00 per share price for the common stock include the following
new product offerings and assets.
Patent Pending for Streaming Audio Visual Works on Networks
-----------------------------------------------------------
This invention patent was applied for in August of 1999 and relates to methods
for producing and presenting audio-visual works for viewing on networks such as
the Internet, and more particularly, to methods for writing, editing and
presenting audio-visual works such as news stories and entertainment, on demand.
Behind the Mask
---------------
Dynamic Media acquired the scripts for "Behind the Mask" for the development and
test marketing of a monthly subscription based DVD series to be introduced in
the consumer marketplace. The acquisition of this six script series was secured
in May, 2001. The anticipated shipment of the first DVD will be during the
second week of October, 2001.
America: A Call to Greatness
----------------------------
The recent acquisition in May, 2001, of the two hour television special,
"America: A Call to Greatness" is an important content addition to Dynamic
Media. We acquired all of the original footage from the production, which
includes over 60 hours of never before seen broadcast footage from across the
United States. From this footage, Dynamic Media is developing two brand new
educational DVDs, one specifically designed for grade levels 4-7 and one for the
consumer market.
Americas Monuments
------------------
This educational DVD series is designed as a tool to teach student about the
monuments across the United States. The DVD will have different teaching
objective, which will make it both entertaining and educational.
Famous Quotes
-------------
Using the recently shot footage of historic recreations, this DVD series will
feature twenty two famous people throughout American history, ranging from
George Washington to Mark Twain.
America to Music
----------------
This DVD is for the consumer market place and is a sixty minute relaxation DVD.
Driven thru classical music and set to an array of stunning cinematography from
around the United States, this DVD is designed for easy listening and unwinding
after a long day.
Most importantly, Dynamic Media, Inc. stands with only a few companies in the
world who have experimented with and produced commercially available DVD titles
that tap into the extreme interactivity that would be required to make DVD work
with advanced entertainment, educational applications and interactive games. We
designed and produced "Sherlock Holmes - Consulting Detective" on DVD in 1999.
This title is one of only a handful of DVDs on the market that are as amazingly
complex and interactive as the format allows. The interactive DVD contains over
1700 menus with more than 5000 buttons. It is a video based game that keeps
track of your score and allows you to "save" and "restore" the game and allows
the player to pick up at a later date where they left off.
Every DVD-Video player is a small self-contained computer. Dynamic
Media, Inc. and its founders have been a part of the computer industry for more
than twenty years and thoroughly understood the implications that were being
presented with the DVD format. This is how we were so quickly able to master the
DVD programming capabilities that allowed us to produce "Sherlock".
We have a 3-year lead on most DVD production companies, and most of them still
do not understand the possibilities. We do.
11
DILUTION
We were initially capitalized by the sale of common stock to our founders and an
offering, in March 1998 of 1,000,000 shares of our Common Stock at $ 1.00 per
share under Regulation D Rule 504. The following table sets forth the difference
between our present shareholders and purchasers of the shares in this offering
with respect to the number of shares purchased from us, the total consideration
paid and the average price paid per share.
The table below assumes the minimum, 50% (1,100,000 shares) and the maximum,
100% (2,200,000 shares) offered hereby are sold.
Dynamic Media, Inc
Assumes 50% of the shares offered are sold.
Shares Issued Total Consideration Average Price
-----------------------------------------------------------
Number Percent Amount Percent Per Share
---------
Present Shareholders 9,718,855 90 $7,710,819 78 $0.79
New Investors 1,100,000 10 $2,200,000 22 $2.00
Total 10,818,855 100% $9,910,819 100% $0.92
Assumes 100% of the shares offered are sold.
Shares Issued Total Consideration Average Price
--------------------------------------------------------
Number Percent Amount Percent Per Share
---------
Present Shareholders 9,718,855 82 $7,710,819 64 $0.79
New Investors 2,200,000 18 $4,400,000 36 $2.00
Total 11,918,855 100% $12,110,819 100% $1.02
As of March 31, 2001 and the net tangible book value of our Common Stock was $
129,128 or $ 0.013 per share based on an the 9,718,855 shares of Common Stock
outstanding. " Net tangible book value" per share represents the amount of total
tangible assets less total liabilities, divided by the number of shares. After
giving effect to the sale by us of 2,200,000 shares of common stock at an
offering price of $2 per share and after deducting estimated expenses our
proforma net tangible book value as of that date would be $4,129,128 or $0.35
per share based on the 11,918,855 shares of common stock to be outstanding at
that time. This represents an immediate dilution by ( i.e. the difference
between the offering price per share of common stock and the net tangible book
value per share of common stock after the offering). of $ 1.65 per share to the
new investors who purchase shares in the offering (" New Investors" ), as
illustrated in the following table ( amounts are expressed on a per share
basis):
This table represents the dilution per share based on the percentage
sold of the total amount of shares being offered.
50.00% 100.00%
Offering price $2.00 $2.00
------------------------------
Net tangible book value before offering $ 129,128 $129,128
Increase attributable to the offering 2,000,000 4,000,000
---------- ----------
Net tangible book value after
giving effect to the offering $2,129,128 $4,129,128
Per share Dilution to new investors $1.80 90% $1.65 83%
----- -----
12
PLAN OF DISTRIBUTION
THIS IS A DIRECT PARTICIPATION WITH NO COMMITMENT BY ANYONE TO PURCHASE ANY
SHARES. THE SHARES WILL BE OFFERED AND SOLD ON A "BEST EFFORTS" BASIS BY OUR
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS AT $2.00 PER SHARE UNTIL ALL SHARES
ARE SOLD OR UNTIL THE OFFERING IS TERMINATED OR OCTOBER 31, 2001.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Dynamic Media, Inc. commenced in February 1996. Based on our decision to
significantly reduce government contracts, at the end of December, 1999, in
favor of producing our own proprietary interactive content on DVD, we have
experienced substantial changes to, and expansion of, our business and
operations. We expect to expand our business and customer base, which will
require us to increase our personnel, develop software, purchase equipment and
license content, which will result in increasing costs.
CASH REQUIREMENTS
In order to finance acquisition of patents and inventions, and fund research and
development projects, it is our intent to raise maximum net proceeds of
$4,000,000 from this public offering, to supplement income in fiscal 2001
operations. This will allow us to reduce the time frame to become fully
operational from several years to less than one year. The following summarizes
anticipated cash requirements to achieve these goals. We would utilize these
funds to produce, on interactive DVD, existing proprietary content, develop new
content, and acquire content rights for $ 1,200,000 and reduce accounts payable
of $300,000. Should we not raise the net maximum proceeds from this offering we
would have to seek other funding sources to supplement funds raised in this
offering to meet the aforementioned cash requirements.
INCREASE IN
SOURCE APPLICATION WORKING CAPITAL
Proceeds from SB-2 offering $4,000,000 $4,000,000
Use in Operations $ 600,000 -600,000
Reduction in accounts payable 300,000 -300,000
Research and Development costs 300,000 -300,000
Project/Content Development 1,200,000 -1,200,000
Purchase of new equipment 100,000 -100,000
Marketing, advertising & promotion 500,000 -500,000
Increase in Working Capital $4,000,000 $3,000,000 $ 1,000,000
NEED FOR ADDITIONAL PERSONNEL
- -----------------------------
Since our sales, marketing and distribution system in North America is in need
of expanding, the projected growth of distribution requires additional costs to
us. It is anticipated that the number of employees may triple during the next
twelve months, even with our outsourcing many tasks.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Results of operations
For the period from inception in February 1996 to March 31, 2001, we incurred a
cumulative net loss of $(7,292,906). Our operating expenses consisted of general
and administrative costs, including professional fees, payroll office and
marketing expenses.
General and administrative fees $4,487,255
Stock purchase discounts $2,292,111
Our research and development costs $ 779,903
The results of operations for the period ending December 31, 2000 are not
necessarily indicative of the results for any future interim period or for the
year ending December 31, 2001. We expected our expenses will continue to
increase as we try to further expand our business.
Liquidity and Capital Resources
Our capital requirements have exceeded our cash flow from operations as we have
been building our business. At March 31, 2001, we had a working capital deficit
of $373,561. As a result, we have depended upon sales of our common stock and
investments from our management to finance our working capital requirements.
Operating activities ended March 31, 2001 created net use of cash of $ 32,695.
We had cash and cash equivalents of $-0- as of March 31, 2001.
We expect to make expenditures of approximately $1,200,000 during the 12 months
following the closing of this offering. These expenditures will be used to
expand our proprietary interactive DVD production, develop our QuickTV presence,
hire additional personnel, sales and marketing, licensing content and developing
our own entertainment content, purchase equipment and general working capital.
We require the proceeds of this offering to expand our operations and finance
our future working capital requirements. Based upon our current plans and
assumptions relating to our business plan we anticipate that $4,000,000 in net
proceeds from this offering will satisfy our capital requirements for at least
12 months following the closing of this offering. If our plans change or our
assumptions prove to be inaccurate, we may need to seek additional financing
sooner than currently anticipated or curtail our operations.
13
Summary Financial Information
------------------------------
The figures below include amortization of goodwill as if the acquisitions had
taken place on January 1, 1999 and amounted to $132,498 and $69,811 in 2000 and
1999.
Pro Forma
---------
1999 2000
Sales $1,270,966 $ 184,817
Operating expenses:
Selling, general and administrative
expenses 4,141,054 2,347,198
Research and development 367,479 0
4,508,533 2,347,198
Operating loss (3,237,567) (2,162,381)
Other income (expense):
Interest income 3,845 1,581
Interest expense (15,497) (12,616)
---------- ----------
(11,652) (11,035)
---------- ----------
Net loss $(3,249,219) $(2,173,416)
---------- ----------
Loss per share:
Basic $(.44) $(.26)
Summary Financial Information
-----------------------------
The following table sets forth summary financial and operating data for Dynamic
Media, Inc. The income statement and balance sheet data set forth below for the
years ended December 31, 1999 and 2000, are derived from the audited financial
statements included elsewhere in this prospectus. The data for the year ended
December 31, 1997 and 1998 as well as three months ending March 31, 2000 and
2001 has been derived from unaudited financial statements of Dynamic Media, Inc.
You should read this information together with the financial statements and the
notes to those statements appearing elsewhere in this prospectus.
YEARS ENDED DECEMBER 31,
1997 1998 1999 2000
UNAUDITED UNAUDITED AUDITED AUDITED
----------------------------------------------------------------
INCOME STATEMENT DATA:
Sales 13,894 172,999 5,000
Operating expenses $(368,637) (1,527,538) (3,481,054) (1,951,624)
Net loss $(368,637) (1,513,644) (3,308,055) (1,946,624)
Net loss per share $ (0.12) (0.30) (0.45) (0.24)
BALANCE SHEET DATA:
Total assets $ 53,150 313,873 780,410 1,006,288
Working capital(deficit) $ (5,653) (45,862) 44,754 (281,027)
Total liabilities $ (22,144) (44,054) (88,133) (374,195)
Stockholders equity $ 75,294 269,819 692,277 632,093
THREE MONTHS
ENDED MARCH 31,
2001 2000
UNAUDITED UNAUDITED
-------------------------------------
INCOME STATEMENT DATA:
Sales $ 67,396
Operating expenses $(223,342) (1,407,433)
Net loss $(155,946) (1,407,433)
Net loss per share $ (0.02) (0.33)
BALANCE SHEET DATA:
Total assets $ 954,635 672,806
Working capital(deficit) $(373,561) (65,679)
Total liabilities $(454,578) (88,131)
Stockholders equity $ 500,057 644,268
14
The $15,940 of consulting expenses in fiscal year 2000, booked in lieu of
$6,940, consisted of the following:
Stock Issued Calculations 2000
NAME SHARES IN LIEU OF $ SERVICES PROVIDED
- ------------------------------------------ ----------------- -----------------------
Louis Gniotek 5,000 1,000 Outside Consultant
Ronald M. Dortone 1,500 990 Legal Consult Agreement
Michael S. Augelio 1,700 1,122 Legal Consult Agreement
Bob Heenan 2,800 1,848 Legal Consult Agreement
Won Lee 3,000 1,980 Legal Consult Agreement
------ ------
14,000 $6,940
The $914,462 of consulting expenses in fiscal year 1999, booked in lieu of
$117,050 consisted of the following:
Stock Issued Calculations 1999
NAME SHARES IN LIEU OF $ SERVICES PROVIDED
- ------------------------------------------- ---------------- --------------------
Sidney J. Pine 202,000 $ 2,000 Outside Consultant
Lori Stinson 23,200 23,200 Outside Consultant
Dominic Castaldo DDS 12,000 11,625 Outside Consultant
Winslow W. Murdock MD 12,000 11,625 Outside Consultant
Richard Sennett MD 12,000 11,625 Outside Consultant
Myron Yanoff MD 12,000 11,625 Outside Consultant
Richard Hayden MD 12,000 11,625 Outside Consultant
Richard Spielvogel MD 12,000 11,625 Outside Consultant
Atlantic Broadcasting Systems 50,000 14,000 Outside Consultant
Miscellaneous 8,100 8,100 Outside Consultant
------ -------
355,300 $117,050
The 1,176,687 shares were issued in 1998 to consultants in lieu of $395,977
and consisted of the following:
Stock Issued Calculations 1998
NAME SHARES IN LIEU OF $ SERVICES PROVIDED
- ------------------------------------------ ---------------- ----------------------
Michael Stern 9,500 $ 8,640 Outside Consultant
Terry Capital Advisors 9,000 9,000 Outside Consultant
Michael Winkler 10,237 10,237 Outside Consultant
Fred Golden 3,350 3,350 Outside Consultant
Glass Associates 3,400 3,400 Outside Consultant
Joseph Glass 1,700 1,700 Outside Consultant
Henry Winkler 14,100 14,100 Outside Consultant
Avara Trading Co. Ltd 75,000 18,750 Outside Consultant
Executive Management Corp 91,500 27,000 Outside Consultant
Craig Batchelor 2,500 1,500 Outside Consultant
Sidney J. Pine 100,000 2,000 Outside Consultant
Caribbean Poly, Ltd 200,000 50,000 Outside Consultant
Iguana Junction, Ltd 200,000 50,000 Outside Consultant
Terry Fields 85,000 7,500 Outside Consultant
Lisa Gurcsik 10,000 1,000 Outside Consultant
Richard Lewis 9,000 900 Outside Consultant
Computer Information Network 150,000 84,500 Outside Consultant
Anthony Dunnigan Outside Consultant
Angela Dunnigan 200,000 100,000 Outside Consultant
Clint Carpenter Outside Consultant
Tania Smith 100 100 Outside Consultant
Chavaleh Braddick 500 500 Outside Consultant
Cory Schmitt 100 100 Outside Consultant
Todd Kelly 100 100 Outside Consultant
Oregna Rose 100 100 Outside Consultant
Martrese Young 100 100 Outside Consultant
Larry Wallison 100 100 Outside Consultant
Nicole Welton 300 300 Outside Consultant
Michael Benchoff 500 500 Outside Consultant
Galina Gonopolsky 500 500 Outside Consultant
--------- --------
1,176,687 $395,977
15
BUSINESS
THE COMPANY
We were formerly known as Dynamic Imaging Systems Corporation and
before that as Brickell Foreclosure Properties, Inc., and were organized under
the laws of the state of Florida in 1996. Our Common Stock is currently listed
Over the Counter (OTC) under the trading symbol "DYMI". Our strategy is to
capitalize on the market opportunities created by the popularity of interactive
DVDs including entertainment and education. . Our focus is on the development
and marketing of effective interactive DVD programs that improve teaching and
learning and provide next generation DVD entertainment.
We are paving the way with new multimedia and interactive DVD ideas
that work...Ideas that produce high earnings and extraordinary growth by staying
ahead of digital technologies with proprietary DVD solutions. We will customize
instruction and allow for individualized learning so that students at home,
young and old, can achieve success at their own pace and level.
We now provide advanced digital media services to our Fortune 1000
clients and others for every commercial purpose including that of education,
marketing, religion and communications enhancement.
Our clients include the Fox Broadcasting Company and all its'
subsidiaries, Paramount Pictures, the US Army, Lockheed-Martin, Spelling
Entertainment, Briggs and Stratton, Pax TV, Lions Gate Entertainment, the Los
Angeles Lakers, Footlocker, Burger King, and many others.
We have also served or currently serve vital governmental clients which
include The Smithsonian Institute, The National Library of Medicine, and The
Maryland Port Authority.
We are a full service, fully interactive DVD and Multimedia
Broadcasting Company. We are entirely equipped with state of the art technology
and equipment in order to provide advanced quality products and services. We are
ready to propel those businesses that have "lined up" for the right assistance,
into the 21st century with digital business advantages. Digital multimedia will
help customers compete in the worldwide and fast paced economy of today.
Dynamic Media, Inc. began in 1996 by creating projects for the National
Security Agency of the United States. Using the magic of animation and graphics,
the Company was responsible for designing classified information in multimedia
form - which was used daily by the Director of the National Security Agency and
his staff. These National Security Agency multimedia presentations were
instrumental in briefing foreign dignitaries, heads of state, and everyone from
high-ranking military commanders to elected civilians at the highest level of
the CIA and the U.S. Congress. This new "digital" way of communicating was
revolutionary in overcoming the complicated task of explaining highly technical
issues to world leaders. We continued our work as a consultant to the Defense
Intelligence Agency inside the Pentagon for advanced classified DVD nuclear war
programs used to further train intelligence officers.
Interactive Entertainment and Education
Dynamic Media, Inc., has received three internationally recognized
awards for its work on the "Sherlock Holmes - Consulting Director" DVD video
game. Given the huge competition for "games" awards, these were major
achievements. Dynamic Media, Inc. is one of only a very few companies in the
world to produce advanced DVD programming and scripting that permits game
players to save and restore their game on a regular DVD player.
We feel that our milestones in breakthrough technology are essential
for our Company turning the corner into the 21st century. We capitalize on new
possibilities which sets us apart from the few competitors that we have. We have
integrated touch screens for our interactive DVD kiosks. These developments were
heavily used by the Maryland Port Authority which enabled student visitors to be
educated about the activities and workings of the seaport.
We have shown that our Company has the ability to secure and fulfill
major commercial contracts such as a current interactive DVD "Titanic Exhibit"
and government contracts such as the current one with the National Library of
Medicine.
The digital video communication industry is the most rapidly growing
business in the world. In the year 2000, annual sales encompassed over $28
billion dollars a year, with sales today - annually increasing exponentially. In
1997, two million prerecorded DVD discs were sold. In twenty-four months, sales
had skyrocketed to 65 million.
We see that as simply just the beginning of the growth. Last year, 183
million discs were sold and for the next sixty months, the number is expected to
climb by approximately 140 million annually and 870 million units per year by
2005. We see those sales far exceeding the VHS 1998 peak of 657 million tapes
sold that year. The highest number ever sold being only 757 million.
We are in an active expansion phase to take advantage of these
remarkable digital multimedia advancements. We are in current development of a
major mainstream entertainment/education project which will teach needed
leadership skills to young people around the nation. Our innovative technologies
will lead the way that others can only follow.
16
QuickTV Suppport Centers
We have developed, designed and are ready to implement QuickTV support
centers that will enhance the way businesses communicate and interact with each
other forever. We will provide local support for our customers to enhance their
learning and entertainment experience.
QuickTV Support Centers will offer a full array of CD and DVD
multimedia products and services to small businesses with special kiosk displays
in high traffic locations. These products and services will provide effective
digital communication by publishing and "burning" information right onto CDs and
DVDs...plus - that data can be immediately streamlined directly to the Internet.
Business to Business Video Yellow Pages
We understand that small and medium size businesses need help dealing
with other businesses. We recognize that our customers need a better way to
promote their sales and promotions. We know they may not have the same
capabilities as their larger competitors and also understand that many of our
customers are at a disadvantage in buying power.
Our goal is to level the playing field by using our Internet service
which will boost our clients in all their commercial areas. In doing so, we will
tie our video directory business into the broader range of our Company's media
services.
We will provide customers the opportunity to take their ideas and new
businesses to the marketplace in a way they never dreamed. They can capture and
store their customer's informational content using Dynamic Media's technologies.
They can convert that information into the proper formats, making it intelligent
and interactive. Finally, they will have the ability to channel all their
processed information to the desired forms of output.
The days of huge funding for successful new business launches are over.
We help our customers reach the mainstream instantly, at costs heretofore
thought impossible. We will continue to create multimedia websites with
substance and style. This will allow customer businesses to grow as their
customers needs grow.
We will create digital images of every product customers want to sell
and we will store those images in a database that can be accessed at any time,
from anywhere in the world. Customers can track sales results according to which
images are viewed, used and how the product was priced.
Interactive Programs on DVD
There are now more than 125 DVD player models marketed under 50
different consumer electronics brands. DVD players are available at practically
all consumer electronics retailers and have become the focal point of the home
theater category. Software shipments continue to accelerate. Nearly 140 million
DVD movies and music video titles were shipped in the first 90 days of 2001,
more than double the number shipped in the same quarter of last year.
This tells us that "content" has an increasing electronic relationship.
In year 2000, over 7.8 million DVD players were sold half of that number was
sold in the fourth quarter. This means that a "Critical Mass" has been reached
with regard to DVD player devices and that the new digital publishing formats
are here to stay. We have combined the advantages of the digital technologies to
be in a position to market a powerful combination of interactive DVD and CD
technologies coupled with the Internet.
In short, we feel strongly that the future is here and it's in CD and
DVD interactive technologies. . . . technologies increasingly tied to the
Internet, entertainment, education and business. We have reorganized to take
advantage of the new market changes which are occurring at a record rate. New
markets are being created and existing ones enhanced.
17
RECENT EVENTS
AMERICA: A CALL TO GREATNESS
Dynamic Media finalized an agreement and closed a transaction acquiring
from Paige Brace Cinema, a major broadcast production, America: A Call to
Greatness. This transaction was completed in May, 2001. This large scale
television special features notable Hollywood heavyweights including Charlton
Heston, Mickey Rooney, Peter Graves, and Rita Moreno together with many of this
era's prominent political figures. America: A Call to Greatness, was filmed at
MGM/DISNEY and in all 50 of the United States. In it's acquisition, Dynamic
Media acquired the original production and all of the original background
footage making up the production.
America: A Call to Greatness, examines this nation's founding and
evolution from the revolutionary days of 1776 to the present. The program makes
use of historically accurate re-creations of famous figures in American History.
All historical personalities are painstakingly re-created to look, speak, and
sound as when they lived. Through the technologies of modern prosthetic makeups
and computer opticals, famous leaders from the past speak to the present. And
while all dialogue is taken from words they actually spoke or wrote, they are
delivered as though they were sitting with the audience in a common "living
room". Settings for the re-creations are "optically" keyed and range from the
period in which they lived to the present. In this way, their words can carry a
meaning far beyond the historical scope of past perspectives. It permits the men
and women of "yesteryear" to address the world of today.
In particular, the show examines, with entertaining "historical"
accuracy, the thoughts, purposes, and motivations of this nation's major leaders
from years past to present. Appearing in America: A Call to Greatness, are three
former Presidents of the United States (Reagan, Carter, and Bush), two U.S.
Senators, two U.S. Congressmen, a U.S. Supreme Court Justice, a military hero
(General Norman Schwarzkopf), and two well-known industrialists. Supporting the
show are twenty-one famous film, television, and sports personalities (from Tia
Carrere to George Foreman and Arnold Swarzenegger). In addition, several major
contemporary religious leaders (from Rev. Peter Marshal to Bill Gaither and Dr.
James Kennedy) contribute their views to the program's theme.
Interspersed throughout the production, are songs and music from the
country's leading artists. All the numbers were produced on a large scale at the
Disney/MGM Studios and carry an extraordinarily high production value. The music
varies from the rock sounds of Andrae Crouch and Petra to the more mellow tones
of Vince Gill and Babie Mason. The music extends from Johnny Cash's "Songs of
America" to Sandi Patti's "Star Spangled Banner". Altogether, eleven well-known
singers and singing groups contribute their talent to underscoring the story and
theme behind America: A Call to Greatness.
Newly filmed scenes from "America" fill the background of this
spectacular. A special photographic team traveled the nation to capture footage
from the foothills of the Dakotas to the spires of New York...from the yawning
expansion of the Golden Gate Bridge to the majestic figures atop Mount Rushmore.
In between are the cities of this nation, its townships and its countryside.
From Hopkinsville, Kentucky to Detroit, Michigan...from Sundance, Wyoming to
Boston, Massachusetts...from Broken Bow, Nebraska to Allentown, Pennsylvania,
the rich scenes of America and its people grace the scenery of America: A Call
to Greatness.
America: A Call to Greatness, is an uplifting and patriotic examination
of this nation's past. It is a nonpartisan, nonpolitical look at America and how
and where it came to be. Through music, drama, and commentary from famous
personalities, it entertainingly presents a substantially different "look at
America". America: A Call to Greatness is in itself, materially unlike any other
presentation that has come before.
The closing of the production ends with addresses from famous
presidents (past and living). Each President offers a commentary on the Office
of the President and its meaning to America. It begins with President Thomas
Jefferson commenting on what the Presidency can take from the office holder.
We intend to use the original film footage to create a myriad of
products including interactive DVDs, education and historical VHS and DVD
products, an educational, entertaining and interactive website, as well as
television production features to be aired worldwide.
18
BEHIND THE MASK
Dynamic Media finalized an agreement in May, 2001, with Dr. Warren
Chaney, a Director of the Company, for the acquisition of scripts for a
production called Behind the Mask. We intend to develop products and services on
DVD and other media as well as broadcast various series elements.
BEHIND THE MASK is a six-hour chapter television film-play--an action
adventure epic with a fascinating story line created and developed by the
company's Director Dr. Warren Chaney. The six chapter serial, filmed in 3-D, has
been developed to accompany six other 3-D films.
This "masked" thriller has nonstop excitement and action, yet without
R-rated language or violent situations, in fact, good old-fashioned heroic
responsibility is a sub-theme moral message. A second BEHIND THE MASK II is
currently under development.
We are currently developing a theme for The Mask in his jet-powered
automobile, for a new realm of victory and morality that the public yearns for
in this day and age that will appear on interactive DVD and will be syndicated
to local and national cable stations.
THE SPACE PATROL
We have acquired certain intellectual property rights and information
with regard to "Space Patrol", with the objective of having the Company pursue
certain projects and plans including interactive DVD products and services and
collectable items, both digital and in advanced photographic form. We have
acquired a sizable collection of "Space Patrol" artifacts, including, but not
limited to video broadcast footage and offering premiums. This transaction was
completed in May, 2001
TEAMING AGREEMENT
Dynamic Media, Inc and Leading Edge Design and Systems, Inc. have
mutually agreed to initially move forward in a Teaming Agreement and Strategic
Partnership, as opposed to a merger, as announced in November, 2000. We felt
that a strategic Teaming Agreement was a better way to initiate the mutual
relationship between the two companies.
Dynamic Media has entered into a Teaming Agreement in February of this
year, with Leading Edge Design & Systems, Inc., a Maryland corporation with
offices at 7521 Connelley, Suite A, Hanover, MD 21076. Because of the diverse,
yet complementary capabilities of both companies, the agreement was entered into
so that both companies can benefit from a joint effort to work toward new
business opportunities that would not be afforded to either Company working
alone. Leading Edge has a specialty in providing digital information management
and exploitation (DIMETM) systems integration services and related product
reselling and support. When combined with the capabilities of Dynamic Media that
includes CD/DVD development and related product reselling, as well as creation,
editing and coding of digital video information, the business and marketing
opportunities increase and thus the potential customer base. Both companies have
worked together in the past.
An example of this joint effort that is defined in the Teaming Agreement is a
recent proposal presented to the FCC. The FCC has a current library of tapes
containing open source TV broadcasts and recordings of conference proceedings it
would like to make available via the Internet to its field agents. Leading Edge
Design and Systems, and Dynamic Media have jointly proposed a solution to the
FCC, in accordance with the Teaming Agreement.
19
MARKET TRENDS
DVD TECHNOLOGY
The foundation of DVD technology is incredible storage capacity (the
media) coupled with Interactive video (the medium). A single CD-sized DVD disc
has enough storage space for the text of 20,000 novels, 100,000 digital photos,
seven hours of CD-quality stereo audio or a high-resolution version of a
theater-quality, feature-length film. This enormous capacity makes DVD the ideal
platform for a broad range of applications, particularly multimedia.
DVD-Video is rapidly transforming the video industry with the type of
impact that the Compact Disc once had on the face of the music business or VHS
with its creation of the home video market.
DVD and its foundation, the DVD-Video Specification guidelines, were
specifically developed to support high resolution, full-screen video
applications, making it the best format ever for bringing the movie theater
experience into the home. Unlike any previous format, DVD was created to allow
for navigation within the video content creating a truly interactive experience
for the viewer.
A DVD-Video disc has the same form factor as a standard CD-ROM disc,
but the similarity stops there. A DVD-Video disc is capable of holding 4-7 GB
(gigabytes) or more of data - enough to fill seven or more standard CD-ROMs -
and that capacity is growing constantly. DVDs storage capacity enables a disc to
comfortably store over two hours of digital video accompanied by CD-quality
surround sound. As a result, most motion pictures can fit on a single DVD disc
while delivering an experience to the home viewer capable of rivaling the
theater experience. Playback is accomplished via a DVD-Video player- a mass
market-priced television peripheral whose main purpose is to play movies,
In addition to the feature movie, a DVD-Video disc can also store up to
eight audio language tracks, thirty-two subtitle tracks, behind-the-scenes
footage, cast filmography and interviews, etc.
A DVD disc is much cheaper to manufacture (about 80 cents per unit for
a DVD disc compared to $2.20 for a VHS tape), occupies less shelf space, and
never needs rewinding,
DVD-Video brings home a standard of video quality that was previously
unattainable in the mass market.
A DVD-ROM drive is a computer peripheral whose main purpose is to play
DVD-ROM discs. As with DVD-Video discs, DVD-ROM discs can hold 4.7 GB or more of
data. DVD-ROM players are also backward compatible, meaning they can play
CD-ROMs and audio CDs.
The flexibility of the DVD-ROM format means that standard DVD titles
can readily transition from playing on a PC to playing on a set-top player
connected to a television. Simultaneously, DVD enables producers to deliver
high-resolution, full-screen multimedia content to the PC desktop. As such, DVD
is truly a universal media format, capable of replacing both VHS tape and CD-ROM
simultaneously. In the corporate world, DVD-ROM is poised to fundamentally
change the computing landscape. Today, the publishers of very large databases -
who now rely on CD-ROM - are about to become pioneers in DVD-ROM publishing, by
repurposing multi-volume CD-ROM sets and optimizing them on a single, convenient
DVD-ROM. DVD-ROM is also the successor of choice for earlier training tools such
as VHS and CD-i.
By 2003, DVD-ROM title revenues are expected to reach a phenomenal $70
billion, as the new media technology supplants CD-ROM as the primary supply
format across both PCs and television set-top boxes.
With the nearly simultaneous explosion of both DVD and the Web, the
convergence of all forms of media is nearing completion. Part of this
convergence is the capability to create DVD titles and to link them to the Web,
either through a computer or via a TV set. These Hybrid DVDs combine the DVD
disc's capacity and capability with the Web's immediacy.
Content is still of primary importance in the multimedia world. Taken
together, DVD and the Web offer a powerful new distribution solution, enabling
content creators to deliver their messages using the high quality and
interactivity of DVD with linkage and seamless integration to Web-base content.
By supporting multiple language tracks, a single DVD disc addresses
geographic and cultural barriers. Simultaneously, a DVD can deliver a variety of
subtitle tracks and even allows user-selectable mixing. For example, an English
audio track can be accompanied by French subtitles.
Multiple video tracks can be embedded on a DVD, allowing diverse
audiences to be addressed by a single disc, while providing the means to ensure
that viewers only see material that is relevant to them. A single DVD can also
contain PAL, NTSC and DVD-ROM material.
In addition to being a superior technical product to previous content
delivery formats, when the cost of DVD is looked at comparatively, it promises
significant opportunities for economic savings and gains. These economic
benefits operate on a variety of levels.
20
The most basic consideration - the cost of manufacturing discs - is
significantly lower than the cost of VHS tape. In addition, the cost of
production for DVD is dramatically lower. For example, the run cost of sending a
DLT tape to a facility to create masters is much lower than the cost of sending
a beta tape to a duplication facility. In fact, it is not uncommon for DVD
duplication to cost as much as fifty percent less per unit than traditional tape
mediums.
DVD makes significantly lower packaging and postage demands. The
typical DVD shares the same low cost packaging scheme as CDs and shares CDs low
shipping weight. Video requires expensive printed boxes and weighs significantly
more.
Most people today have heard something about DVD. And for most, DVD
means Hollywood movies. As one of the most successful consumer technology
introductions in history, with millions of players and thousands of movie titles
already delivered, it is no wonder that Hollywood is what people think of first.
But DVD is also delivering in many ways the public has not yet realized.
The nature of DVD's success lies in a true business revolution - the
convergence of the computer, entertainment and consumer electronic industries.
Hundreds of companies - including the powerhouses of each of those industries -
combined forces to jointly develop and support a single technology that meets
all their collective needs for media delivery.
DVD is one of those rare developments that significantly impacts the
marketplace on practically every level simultaneously. From consumers looking
for exciting new entertainment; creatives working to showcase their talent;
postproduction facilities hoping to maximize profits; and corporations needing
to communicate with their employees and their customers, DVD has opened broad
new avenues for delivering all forms of digital content. Moreover, for every one
of those applications, there is massive potential for bottom-line return for
those who create DVD titles.
INTERNET INDUSTRY
Internet to Have a Billion Users by 2005
Almost one billion people, or about 15 percent of the world's
population, will be using the Internet by 2005, growth that may generate more
than $5 trillion in online commerce by the end of that year.
The increase would represent 70 percent compounded annual growth from
the $354 billion spent online last year. The results even take into account the
recent slowdown in growth in the U.S.
We intend to take advantage of this growth by having our proprietary
interactive DVDs be "web" enabled. This new WebDVD concept is being accepted by
consumers for updating DVD content information and enhancing the interactive DVD
experience.
DISTRIBUTION METHODS
Marketing in the United States: Following a careful analysis of the
marketing strengths of our products and services and its initially limited
available resources for traditional marketing, we elected to avail ourselves of
the power and dynamics of the well-established multi-billion dollar per year DVD
and other video and audio distribution. With a steadily expanding network force
in the marketplace, with a ready-made marketing and distribution channel for our
products and services, we feel that our experience in these markets and our
knowledge of the industry provides us with capable distribution methods. We
believe that the combination of a network of independent distributors, our own
planned dealer network and a range of our own proprietary and desirable
published content, will enable us to be successful in making our products and
services available in the marketplace.
COMPETITION
The market for consumer and business products and services provided
from the Company is extremely competitive and highly fragmented. There are no
significant barriers to entry and we expect that competition will intensify in
the future. Many of our competitors and potential competitors have substantially
larger libraries of content, longer operating histories, greater name
recognition and more established relationships with distributors and retail
vendors. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to developing digital media products. There can be no assurances that
we will be able to compete successfully against current or future competitors or
that competitive pressures faced by us will not materially adversely affect our
business, operating results or financial condition. Further, as a strategic
response to changes in the competitive environment, we may make certain pricing,
service or marketing decisions or enter into acquisitions or new ventures that
could have a material adverse effect on our business, operating results or
financial condition.
21
EMPLOYEES
As of May 30, 2001, we employed a total of 11 employees, of whom 4 are
in management, 2 in administration, 2 in marketing, 1 in customer service, 2 on
the technical staff, and additional outsourced part-time employees are utilized
from time to time. None of our employees are represented by a labor union. We
have not experienced any work stoppage and consider relations with our employees
to be good.
FACILITIES
We currently lease our office facilities in Los Angeles on a year to year
basis for $3,400 per month to provide space for technical operations, additional
space in Philadelphia, PA for $ 4,000 per month for administration, and $ 1,000
per month in Baltimore, MD for technical operations, support and customer
service. Our facilities are adequate for our current needs and suitable
additional space, when needed, will be available to accommodate expansion of our
operations on commercially reasonable terms.
MANAGEMENT
There are currently eight seats on the board of directors. The following
table sets forth information with respect to the directors and executive
officers.
DATE SERVICE
NAME AGE OFFICE COMMENCED
- ---- --- ------ ------------
Ian D. Jones* 31 President January, 2000
Duane Tucker* 43 Vice President, Chief Technical Officer January, 2000
Sidney J. Pine* 65 Vice President, Chief Financial Officer January, 1999
Michael Benchoff 30 Vice President,
Director of Technical Operations June, 1998
Kevin Beck 30 Vice President,
Director of Advertising and New Media May, 2001
Craig Hope* 57 Vice President, Administation January, 1998
Vanessa Fields 30 Vice President,
Director of Corporate Relations June, 2001
Warren Chaney, Ph.D* 58 Vice President,
New Content Development May, 2001
Theresa Corrado 55 Secretary Office Administration January, 1999
Dominic Castaldo,D.D.S* 58 Director January, 1998
Myron Yanoff, M.D*. 64 Director May, 2001
Tom DeLuca* 30 Director May, 2001
MARKET FOR COMMON EQUITY
Our common stock is quoted on the OTC Pink Sheets, under the symbol "DYMI".
The following table sets forth the highest and lowest bid prices for the common
stock for each calendar quarter during the last three years and subsequent
interim periods as reported by the National Quotation Bureau.
The prices set forth below represent inter-dealer quotations, without
retail markup, markdown or commission and may not be reflective of actual
transactions.
HIGH BID LOW BID
FISCAL 1998 -------- -------
First Quarter ........................ 1.00 1.00
Second Quarter ....................... 1.75 1.37
Third Quarter ........................ 1.68 1.56
Fourth Quarter ....................... 1.37 .94
FISCAL 1999
First Quarter ........................ 2.56 1.37
Second Quarter ....................... 3.87 2.44
Third Quarter ........................ 2.68 2.31
Fourth Quarter ....................... 2.50 1.25
FISCAL 2000
First Quarter ........................ 1.75 1.44
Second Quarter ....................... .55 .35
Third Quarter ........................ .31 .20
Fourth Quarter ....................... .35 .06
FISCAL 2001
First Quarter ........................ .12 .07
On June 20, 2001, the closing bid price of the common stock on the OTC Pink
Sheets was $ .10. As of March 31, 2001 there were approximately 1,355
shareholders of record. We have never paid or declared any dividends on its
common stock and do not anticipate paying any cash dividends in the foreseeable
future. We currently intend to retain future earnings to fund the development
and growth of our business.
22
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2001, by (i) each person including
any "group" as that term is used in Section 13(d)(3) of the Securities Act of
1934 (the "Exchange Act") who is known by us to own beneficially 5% or more of
the common stock, (ii) each Director of the Company, and (iii) all directors and
executive officers as a group Unless otherwise indicated, all persons listed
below have sole voting power and investment power with respect to such shares.
The total number of shares authorized is 20,000,000 shares, each of which is
$.001 per share par value. 9,718,855 shares have been issued and are
outstanding:
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering
----------------------- -------------------------
Number Percent Number Percent
------ ------- ------ -------
Advanced Corporate
Technology, Inc. 1,200,000 12.34 1,200,000 10.06
Ian D. Jones* 650,000 6.68 650,000 5.45
Leading Edge Design &
Systems, Inc. 625,000 6.46 625,000 5.25
Duane Tucker* 625,000 6.46 625,500 5.25
Bethany Ventures 500,000 5.16 500,000 4.20
Craig Hope* 417,500 4.30 417,500 3.51
Sidney Pine* 302,000 3.10 302,000 2.53
Vanessa Fields 200,000 2.05 200,000 1.67
Myron Yanoff, M.D.* 162,000 1.67 162,000 1.36
Dominic Castaldo, D.D.S.* 112,000 1.15 112,000 .94
Warren Chaney, Ph.D.* 100,000 1.03 100,000 .84
Theresa Corrado 100,000 1.03 100,000 .84
Tom DeLuca* 100,000 1.03 100,000 .84
Kevin Beck 100,000 1.03 100,000 .84
Michael Benchoff 100,000 1.03 100,000 .84
--------- ------ ---------- ------
Total shares
outstanding 9,718,855 100.00 11,918,855 100.00
Directors and officers as a group 2,866,500 shares.
*Indicates Board Member
All directors will hold office until the next annual stockholders meeting and
until their successors have been elected or qualified or until death,
resignation, retirement, removal, or disqualification. Vacancies on the board
will be filled by a majority vote of the remaining directors. Our officers serve
at the discretion of the board of directors. We intend to increase the board
from its present three members to a minimum of six members by adding outside
directors at our next shareholders meeting.
23
Ian D. Jones*, is the President and a Director of the Company. He developed the
business model that defines the company's line of products and services. Mr.
Jones business background includes 10 years of related experience in
establishing and maintaining start-up businesses involved in entertainment and
media industries. Growing up in a media oriented family, Jones has first hand
knowledge of the television and infomercial industry. He has proved that he
knows what is most effective in the highly competitive mass media distribution
markets. Ian worked his way up the corporate entertainment ladder from
production assistant to producer, working for such companies as Universal
Studios, Fries Entertainment, Prime Ticket, Republic Pictures and ESPN. As
President of the Company with a personal commitment to deliver first rate
products, Mr. Jones will continue the innovative and quality programming which
is the cornerstone of the company's success.
Duane Tucker*, is a Vice President, CTO (Chief Technical Officer) and a Director
of the Company. He was the the founder of Dynamic Media (Maryland) and has
operated that Company as President and Chief Technical Officer since 1995. In
the process of building the Company to its current status of a major multimedia
and DVD producer in the Baltimore/Washington area, Mr. Tucker took a leadership
role in marketing, sales, and technical production efforts. As such, Mr. Tucker
is now a well-respected authority in the DVD industry and has created beneficial
relationships with other video and media production companies, while he served
as the Chairman of the Washington chapter of the DVD Association. Prior to
starting Dynamic Media, Inc., Mr. Tucker was a senior programmer on several
Department of Defense contracts and also spent 12 years in the
mainframe/mini-computer field service industry for major corporations.
Sidney J. Pine, C.P.A.*, is a Vice President and CFO (Chief Financial Officer)
and a Director of the Company. Sid is a graduate of the Wharton School of the
University of Pennsylvania with a degree in Economics, is a Certified Public
Accountant in the Commonwealth of Pennsylvania, a Member of the Pennsylvania
Institute of Certified Public Accountants, as well as the American Institute of
Certified Public Accountants. Mr. Pine oversees financial and accounting
systems, as well as cost controls. Also, included in his many duties is
providing audit and reporting functions, assistance in financing new ventures,
and general business and tax solutions.
Dr. Warren Chaney*, is a Vice President and a Director of the company. An award
winning screenwriter, producer, and Director, Warren is responsible for
developing proprietary content and acquiring existing content for the company's
DVD publishing activities as well as other forms of distribution. Dr. Chaney is
a seasoned veteran in the feature film and television industry. He has written,
produced, and directed numerous projects, including motion picture, television,
and broadcast program productions. Dr. Chaney wrote, produced and directed the
critically acclaimed, "America: a Call to Greatness," starring Charlton Heston.
Chaney has written and sold twelve screenplays, produced twelve, and directed
seven others. Chaney worked with and directed many well-known actors. These
include: Mickey Rooney, Jane Russell, Dick van Patten, Peter Graves, Deborah
Winters, Charlton Heston, Cassidy Rae, Rita Moreno, and Gene Autry. For his
efforts, Dr. Chaney has received considerable recognition and numerous industry
awards, including those for best Director and screenwriter.
Michael Benchoff, is a Vice President and Director of Technical Operations for
the Company. Mike has been with Dynamic Media, Inc. since 1998 and has been
responsible for maintaining and facilitating the company's Internet presence.
His responsibilities include developing and programming, maintaining the Company
web sites, performing server administration tasks and researching up-and-coming
methods and technologies. Prior to joining the Company, Mike worked as a
Multimedia Programmer at Kelltech International, which is now part of Park City
Solutions. He has also worked as a Multimedia Programmer for Vantage One
Communications Group, now part of FutureNext Consulting, Inc. Mike has a
bachelor's degree in mathematics.
24
Kevin Beck, is a Vice President and Director of Advertising and New Media
Productions for the Company. As the former owner of Beck Films, the Los Angeles
based Promotion Company, formed in 1996 he is an award winning Producer
representing such clients as: The FOX Broadcasting Company, PAX TV, Lions Gate
Entertainment, and the Los Angeles Lakers to name a few, Kevin has successfully
directed the formation of a strong foundation in the Home Video Trailer, On-Air
Promotion/Advertising and Corporate Presentation Market. Mr. Beck has written
and produced on-air campaigns and presentations to promote the National Football
League, Major League Baseball and the National Basketball Association. He
successfully promoted the 1996 and 1998 World Series with record setting ratings
and helped launch the promotion of Super Bowl XXXI and Super Bowl XXXIII with
the FOX Network. Kevin was instrumental in the promotion of television programs,
Ally McBeal and The X-files, and his group was awarded the 1998 Promax award for
the X-files season premiere campaign.
Vanessa Fields, is a Vice President and Director of Corporate Relations. Vanessa
began her career in Public Relations & Marketing in 1989. Ms. Fields directed
product marketing and handled accounts such as renowned Italian jewelry designer
Bvlgari, The Multi-Lock, Aveda Products/Esthetique, Piper Sonoma and Lalique.
Once mastering the field of product marketing while bringing her clients and
their products profound exposure and extremely lucrative cross promotions she
then decided to expand and experience the production industry, which lead her to
Leading Edge Entertainment. While at Leading Edge Entertainment, now a division
of the Company, Ms. Fields now oversees all aspects of corporate relations as it
relates to production and mainly focuses on product marketing. She has worked
with such celebrities as Howie Mandel, Carol Burnett, Anne Archer, Clint
Eastwood, and creative new shows such as Politically Incorrect with Bill Maher
and Master of the Game. While continuing to work with Director/Producer Patrick
Markey led Ms. Fields to the position of key publicist for Darren Star,
Creator/Executive Producer of Beverly Hills, 90212 and Melrose Place.
Craig L. Hope*, is a Vice President and Director of the Company and is
responsible for corporate compliance and stockholder communications products.
Over the last 10 years, Mr. Hope has been involved in several developmental
stage companies from their inception. He coordinates the Company's legal and
accounting activities and directs overall administrative day-to-day operations.
Mr. Hope is also involved in information research related to background and
prior art as it pertains to patent and trademark applications for present and
future product development. Mr. Craig L. Hope intends to devote full time to the
Company acting in the executive capacity.
Theresa Corrado, is the Secretary of the Company and has served in an
administrative communications capacity. Ms. Corrado has been the owner of
several small business during the past 5 years and has been involved in
providing services to large organizations for the City of Philadelphia.
Dominic Castaldo, D.D.S*., is a Director of the Company and has been an active
member of the Company's Medical Advisory Board. For the last 12 years, Dr.
Castaldo has been involved in the design and implementation of several medical
and dental online information services and served as President of the American
Dental Network, a telecommunication service provided for members of the American
Dental Association. He was President of the Southern District Dental Society and
a member of the peer review board of the Chester County Dental Society. Dr.
Castaldo is also in the private practice of Orthodontics. Dr. Castaldo intends
to devote 20% of his time to the Company acting in an advisory capacity.
Tom De Luca*, is a Director of the Company. Tom is presently Director of
Internet Operations and New Media at one of the film industries most reputable
film studios,- Lions Gate Entertainment. Tom was the President of
Independentfilms.com and is currently on the Board of Directors.
Independentfilms.com is a networking and showcase destination for the
independent film maker. Tom has an extensive background in the Internet industry
through executive management positions at the Boston Globe. Tom has a degree
from Northeastern University in Film and Television.
Myron Yanoff, M.D.*, is a Director of the Company. Dr. Yanoff has directed the
company's Medical Advisory Board for the last three years and has been involved
in developing several medical video surgery products that will be introduced by
the Company in the near future. Dr. Yanoff is Professor and Chairman of the
Department of Ophthalmology, MCP Hahnemann University. Previously, he had been
Professor and Chairman, Department of Ophthalmology, University of Pennsylvania,
and the Director of the Scheie Eye Institute. He has authored over 150 articles
in peer reviewed scientific journals, co-authored a 10 volume textbook on
general ophthalmology, and has written 8 textbooks on ophthalmic pathology and
histology. He has received many honors, including the Senior Distinguished U.S.
Scientist Award (Humboldt-Award) in 1988 in recognition of his life-long
contributions to medical science.
25
EXECUTIVE COMPENSATION
The following table sets forth the annual remuneration for the highest paid
officers and directors for the annual period ended December 31, 2000.
Ian Jones* President (partial year) $ 20,000
Craig Hope* Vice President 50,000
Sid Pine* Vice President 100,000
Michael Benchoff Vice President 65,000
Theresa Corrado Secretary 50,000
* Indicates Director
EMPLOYMENT AGREEMENTS
We plan to enter into an employment agreement with Duane Tucker for an annual
base compensation of $ 135,000, at the completion of this offering.
STOCK OPTIONS
We have not adopted any formal stock option plans to reward and provide
incentives to our officers, directors, employees, consultants and other eligible
participants, but is anticipated we will do so as follows: an executive stock
incentive plan, and a stock incentive plan. The board will set aside 600,000
shares for issuance under these plans, if and when adopted. Awards under each
plan may be in the form of incentive stock options or non-qualified stock
options. We will not grant non-qualified stock options with an exercise price of
less than 85% of the fair market value of our common stock on the date of grant
of the relevant option. The plans will be administered by our board of
directors, which is authorized to select the plan recipients, the time or times
at which awards may be granted and the number of shares to be subject to each
option awarded.
OTHER TRANSACTIONS
All transactions between our Company and its officers, directors and 5% or
more shareholders will be on terms no less favorable to the Company than that
which could be obtained from independent third parties.
DIRECTORS' COMPENSATION
Our directors receive 50,000 shares of the company's stock as compensation
for their services as directors. Additionally certain directors can receive
additional payment in stock for special consulting services outside the normal
Director meetings. Directors receive compensation for travel and other expenses
incurred in connection with attendance at each meeting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
At present we have not entered into individual indemnity agreements with our
officers or directors. However, our by-laws contain a provision which requires
us to indemnify any Director or officer, or former Director or officer against
actual expenses incurred in defending any legal action where they are a party by
reason of being or having been a Director or officer. However, we are not
required to indemnify any such person who is found to be liable for negligence
or misconduct in their performance of their duty.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
Director, officer or controlling person 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, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and we will be governed by the final adjudication of
such case.
DIRECTORS AND OFFICERS INSURANCE
We are exploring the possibility of obtaining directors and officers liability
insurance. We have obtained several premium quotations but have not entered into
any contract with any insurance Company to provide said coverages as of the date
of this offering. There is no assurance that we will be able to obtain such
insurance.
KEY MAN LIFE INSURANCE
Life insurance on key personnel is expected to be purchased after the effective
date of this offering from offering proceeds, in amounts up to $1 million, 50%
payable to the Company and 50% payable to family beneficiaries. We are planning
to purchase such insurance to provide us with the capital to replace the
executive loss (executive search for successor, etc.). The costs of such
insurance is not expected to be material.
26
CERTAIN TRANSACTIONS
In March 1998, we offered 1,000,000 shares of our Common Stock at $1.00 under
Regulation D, Rule 504. We successfully closed this Offering in May, 1998.
DESCRIPTION OF SECURITIES
All material provisions of our capital stock are summarized in this prospectus.
However the following description is not complete and is subject to applicable
Florida law and to the provisions of our articles of incorporation and by-laws.
We have filed copies of these documents as exhibits to the registration
statement related to this prospectus.
COMMON STOCK
We are authorized to issue 20,000,000 shares, at a par value of $.001 per share.
As of the December 31, 2000, there were 9,688,855 shares outstanding. After
giving effect to the offering, the issued and outstanding capital stock of the
Company will be 11,888,855 shares.
YOU HAVE THE VOTING RIGHTS FOR YOUR SHARES. You and all other holders of common
stock are entitled to one vote for each share held of record on matters to be
voted on by stockholders. You have no cumulative voting rights with respect to
the election of directors, with the result that the holders of more than 50% of
the shares voting for the election of directors can elect all of the directors
then up for election.
YOU HAVE DIVIDEND RIGHTS FOR YOUR SHARES. You and all other holders of common
stock are entitled to receive dividends and other distributions when, as and if
declared by the board of directors out of funds legally available, based upon
the percentage of our common stock you own. We will not pay dividends. You
should not expect to receive any dividends on shares in the near future. This
investment may be inappropriate for you if you need dividend income from an
investment in shares.
YOU HAVE RIGHTS IF WE ARE LIQUIDATED.
Upon our liquidation, dissolution or winding up of affairs, you and all other
holders of our common stock will be entitled to share in the distribution of all
assets remaining after payment of all debts, liabilities and expenses, and after
provision has been made for each class of stock, if any, having preference over
our common stock. Holders of common stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the common stock. All of the outstanding common stock is, and the
common stock offered hereby, when issued in exchange for the consideration paid
as set forth in this prospectus, will be, fully paid and non-assessable. Our
directors, at their discretion, may borrow funds without your approval, which
potentially further reduces the liquidation value of your shares.
YOU HAVE NO RIGHT TO ACQUIRE SHARES OF STOCK BASED UPON THE PERCENTAGE OF OUR
COMMON STOCK YOU OWN WHEN WE SELL MORE SHARES OF OUR STOCK TO OTHER PEOPLE. This
is because we do not provide our stockholders with preemptive rights to
subscribe for or to purchase any additional shares offered by us in the future.
The absence of these rights could, upon our sale of additional shares, result in
a dilution of the percentage ownership that you own.
27
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 11,918,855 shares issued and
outstanding assuming all the shares offered herein are sold. The common stock
sold in this offering will be freely transferable without restrictions or
further registration under the Securities Act, except for any of our shares
purchased by an affiliate (as that term is defined under the Act) who will be
subject to the resale limitations of Rule 144 promulgated under the Act.
There will be approximately 5,869,955 shares outstanding that are restricted
securities as that term is defined in Rule 144 promulgated under the Securities
Act.
The common stock owned by insiders, officers and directors are deemed restricted
securities as that term is defined under the Securities Act and in the future
may be sold under Rule 144, which provides, in essence, that a person holding
restricted securities for a period of one (1) year may sell every three (3)
months, in brokerage transactions and/or market maker transactions, an amount
equal to the greater of (a) one percent (1%) of our issued and outstanding
common stock or (b) the average weekly trading volume of the common stock during
the four (4) calendar weeks prior to such sale. Rule 144 also permits, under
certain circumstances, the sale of common stock without any quantity limitation
by a person who is not an affiliate of the Company and who has satisfied a two
(2) year holding period. Additionally. Common stock underlying employee stock
options granted, to the extent vested and exercised, may be resold beginning on
the ninety-first day after the Effective Date of a Prospectus, or Offering
Memorandum pursuant to Rule 701 promulgated under the Securities Act.
As of the date hereof and upon completion of the offering, none of our common
stock (other than those which are qualified by the Securities and Exchange
Commission in connection with this offering) are available for sale under Rule
144. Future sales under Rule 144 may have an adverse effect on the market price
of the common stock. Our officers, directors and certain of our security holders
have agreed not to sell, transfer or otherwise dispose of their common stock or
any securities convertible into common stock for a period of 12 months from the
date hereof.
Under Rule 701 of the Securities Act, persons who purchase shares upon exercise
of options granted prior to the date of this Prospectus are entitled to sell
such common stock after the 90th day following the date of this Prospectus in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are subject to all Rule 144 restrictions after this 90 day
period, but without a holding period.
There has been no public market for our common stock. With a relatively minimal
public float and without a professional underwriter, there is little or no
likelihood that an active and public trading market, as that term is commonly
understood, will develop, or if developed that it will be sustained, and
accordingly, an investment in our common stock should be considered highly
illiquid. Although we believe a public market will be established in the future,
there can be no assurances that a public market for our common stock will
develop. If a public market for the common stock does develop at a future time,
sales by shareholders of substantial amounts of our common stock in the public
market could adversely affect the prevailing market price and could impair our
future ability to raise capital through the sale of our equity securities.
28
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 relating to the common stock offered hereby. This
prospectus, which is a part of the registration statement, does not contain all
of the information included in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to us, the common stock
offered hereby, reference is made to the registration statement, including the
exhibits and schedules thereto. Statements contained in this Prospectus
concerning the provisions or contents of any contract, agreement or any other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or document filed as an exhibit to the registration
statement, reference is made to such exhibit for a more complete description of
the matters involved.
The registration Statement, including the exhibits and schedules thereto, may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, DC 20549 and
at the Commissions regional offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The address of such
site is http://www.sec.gov.
We intend to furnish to our shareholders annual reports containing audited
consolidated financial statements certified by independent public accountants
for each fiscal year and quarterly reports containing unaudited consolidated
financial statements for the first three quarters of each fiscal year.
We will provide without charge to each person who receives a Prospectus, upon
written or oral request of such person, a copy of any of the information that
was incorporated by reference in the Prospectus (not including Exhibits to the
information that is incorporated by reference unless the Exhibits are themselves
specifically incorporated by reference). Any such request shall be directed to
the Chief Financial Officer of Dynamic Media, Inc, 2000 Hamilton Street, Suite
596, Philadelphia, PA, 19130.
Within five days of our receipt of a subscription agreement accompanied by a
check for the purchase price, we will send by first class mail a written
confirmation to notify the subscriber of the extent, if any, to which such
subscription has been accepted. We reserve the right to reject orders for the
purchase of shares in whole or in part. Upon acceptance of each subscriber, we
will promptly provide our stock transfer agent the information to issue shares.
You can also call or write us at any time with questions you may have. We would
be pleased to speak with you about any aspect of this offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that reflect our views about
future multimedia presentations and financial performance. Our actual results,
performance or achievements could differ materially from those expressed or
implied in these forward-looking statements for various reasons, including those
in the risk factors section of this prospectus. Therefore, you should not place
undue reliance upon these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and anticipate
that all future earnings will be retained for development of our business. The
payment of any future dividends will be at the discretion of our board of
directors and will depend upon, among other things, future earnings, capital
requirements, the financial condition of the Company and general business
conditions.
STOCK TRANSFER AGENT
Our transfer agent and registrar of the common stock is Dynamic Media Transfers,
2000 Hamilton Street, Suite 596, Philadelphia, PA, 10130
EXPERTS
The consolidated combined financial statements of Dynamic Media, Inc.,(a
development stage Company) as of and for the years ended December 31, 1999 and
2000 have been audited by Larson, Allen, Weishair & Co., LLP, independent
auditors, as set forth in their report thereon included herein and incorporated
herein by reference. Such consolidated combined financial statements have been
included in reliance upon such report given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
There is no past, pending or, to our knowledge, threatened litigation or
administrative action which has or is expected by our management to have a
material effect upon our business, financial condition or operations, including
any litigation or action involving our officers, directors, or other key
personnel.
The Law Offices of Terry R. Fields, Esq., 2200 Benjamin Franklin Parkway, E105a,
Philadelphia, PA 19130, Tel. # (215) 981-1011, will pass upon certain legal
matters relating to the Offering.
There is no underwriter for this offering, therefore, offerees will not have the
benefit of an underwriters due diligence efforts which would typically include
the underwriter to be involved in the preparation of disclosure and the pricing
of the common stock offered hereby among other matters. As we have never engaged
in the public sale of our common stock, we have no experience in the
underwriting of any such offering. Accordingly, there is no prior experience
from which investors may judge our ability to consummate this offering. In
addition, the common stock is being offered on a best efforts basis.
Accordingly, there can be no assurances as to the number of shares that may be
sold or the amount of capital that may be raised pursuant to this offering.
29
ITEM 28. UNDERTAKINGS
The undersigned registrant undertakes:
(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this registration statement
To include any prospectus required by section I O(a)(3) of the Securities Act of
1933;
To reflect in the prospectus any facts or multimedia presentations arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment) which, individually or in the aggregate, represent a
fundamental change in the information in the registration statement;
To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to the
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of securities at that time shall be deemed to be the
initial bona fide offering.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission any supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
to that section.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to our certificate of incorporation or provisions of Florida
law, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission the indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against 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 a Director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether the indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
30
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Dynamic Media, Inc. and Subsidiaries
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Dynamic Media, Inc. and
Subsidiaries (a development stage company) (formerly Dynamic Imaging Systems
Corporation) as of December 31, 2000 and 1999, and the related statements of
operations, stockholders' equity (deficiency), and cash flows for the years
ended December 31, 2000 and 1999 and for the period from February 13, 1996
(inception) to December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dynamic Media, Inc. and
Subsidiaries as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years ended December 31, 2000 and 1999 and from
February 13, 1996 (inception) to December 31, 2000, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception and has experienced
liquidity problems. Unless the Company can continue to obtain financing from the
issuance of common stock and/or through loans, substantial doubt arises about
the Company's ability to continue as a going concern (Note 1). The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
LARSON, ALLEN, WEISHAIR & CO., LLP
Blue Bell, Pennsylvania
February 14, 2001
31
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
March 31,
1999 2000 2001
------ ------ ---------
(Unaudited)
Current assets:
Cash $ 132,887 $ 8,785 $ -
Accounts receivable 12,935 15,693
Advances 6,500 6,500
---------- ----------- ---------
132,887 28,220 22,193
---------- ----------- ---------
Property and equipment:
Furniture and office equipment 386,791 559,883 559,883
Computer equipment and software 317,913 317,913 317,913
---------- ----------- ---------
704,704 877,796 877,796
Less: accumulated depreciation 57,181 276,207 318,083
---------- ----------- ---------
647,523 601,589 559,713
---------- ----------- ---------
Other assets:
Deposit 1,800 1,800
Goodwill, net of accumulated amortization
of $75,000 at December 31, 2000 and
$78,750 at March 31, 2001 374,679 370,929
----------- ---------
376,479 372,729
----------- ---------
$ 780,410 $1,006,288 $954,635
========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 68,270 $ 176,877 $ 169,752
Lease payable, current portion 24,500 30,625
Accrued expenses 19,863 107,870 195,377
---------- ----------- ---------
Total current liabilities 88,133 309,247 395,754
---------- ----------- ---------
Long-term debt:
Lease payable, net of current portion 64,948 58,824
----------- ---------
Commitments
Stockholders' equity:
Common stock 7,841 9,689 9,719
Additional paid-in capital 5,874,772 7,759,364 7,783,244
Accumulated deficit (5,190,336) (7,136,960) (7,292,906)
----------- ---------- ----------
692,277 632,093 500,057
----------- ---------- ----------
$ 780,410 $1,006,288 $ 954,635
=========== ========== ==========
F-1
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
AND FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FOR THE PERIOD FEBRUARY 13, 1996 (INCEPTION)
TO MARCH 31, 2001
Three Months Cumulative
Ended March 31, Since
1999 2000 2000 2001 Inception
------ ------ ------ ------ ---------
(Unaudited) (Unaudited)
Sales $ 172,999 $ 5,000 $ - $ 67,396 $ 266,363
---------- ------------ ------------ ----------- -----------
Operating expenses:
Selling, general, and
administrative expenses 3,113,575 1,951,624 1,407,433 223,342 6,779,366
Research and development 367,479 - - - 779,903
---------- ------------ ------------ ----------- -----------
3,481,054 1,951,624 1,407,433 223,342 7,559,269
---------- ------------ ------------ ----------- -----------
Net loss $(3,308,055) $ (1,946,624) $(1,407,433) $ (155,946) $(7,292,906)
=========== ============ =========== =========== ===========
Loss per share:
Basic $ (.45) $ (.24) $ (.33) $ (.02) $ (.75)
=========== ============ =========== =========== ===========
Diluted $ (.45) $ (.24) $ (.33) $ (.02) $ (.75)
=========== ============ =========== =========== ===========
Weighted average shares 7,378,500 8,263,618 4,214,927 9,703,855
=========== ============ =========== ===========
F-2
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 13, 1996 (INCEPTION) TO MARCH 31, 2001
Common Additional
Shares Paid-in
Outstanding Amount Capital Deficit Total
----------- ------ ---------- ------- -----
Balance,
February 13, 1996 --- $ --- $ --- $ ---
Issuance of common stock 2,090,000 2,090 4,910 7,000
---------- --------- --------- ---------
Balance,
December 31, 1996 2,090,000 2,090 4,910 7,000
Issuance of common stock 462,800 462 178,000 178,462
Issuance of common
stock for services 1,098,000 1,098 182,371 183,469
Issuance of common stock
for purchase of subsidiary 300,000 300 74,700 75,000
Net loss for the year ended
December 31, 1997 $ (368,637) (368,637)
---------- --------- --------- ----------- ---------
Balance,
December 31, 1997 3,950,800 3,950 439,981 (368,637) 75,294
Issuance of common stock 1,355,568 1,356 1,310,836 1,312,192
Issuance of common
stock for services 1,176,687 1,177 394,800 395,977
Net loss for the year ended
December 31, 1998 (1,513,644) (1,513,644)
---------- --------- --------- ----------- ---------
Balance,
December 31, 1998 6,483,055 6,483 2,145,617 (1,882,281) 269,819
Issuance of common stock 1,002,500 1,003 2,815,048 2,816,051
Issuance of common
stock for services 355,300 355 914,107 914,462
Net loss for the year ended
December 31, 1999 (3,308,055) (3,308,055)
---------- --------- --------- ----------- ---------
Balance,
December 31, 1999 7,840,855 $ 7,841 $5,874,772 $(5,190,336) $ 692,277
Issuance of common stock 584,000 584 1,532,416 1,533,000
Issuance of common
stock for services 14,000 14 15,926 15,940
Issuance of common
stock for purchase of
subsidiary 1,250,000 1,250 336,250 337,500
Net loss for the year ended
December 31, 2000 (1,946,624) (1,946,624)
---------- --------- --------- ----------- ---------
Balance,
December 31, 2000 9,688,855 $ 9,689 $7,759,364 $(7,136,960) $ 632,093
Issuance of common stock 30,000 30 23,880 23,910
Net loss for the period ended
March 31, 2001 (155,946) (155,946)
---------- --------- --------- ----------- ---------
Balance,
March 31, 2001 (unaudited) $9,718,855 $ 9,719 $7,783,244 $(7,292,906) $ 500,057
========== ========= ========== =========== =========
F-3
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
AND FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FOR THE PERIOD FEBRUARY 13, 1996 (INCEPTION)
TO MARCH 31, 2001
Three Months Cumulative
Ended March 31, Since
1999 2000 2000 2001 Inception
------ ------ ------ ------ ---------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(3,308,055) $(1,946,624) $(1,407,433) $(155,946) $(7,292,906)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 102,974 140,507 35,235 45,626 325,392
Common stock issued for services 914,462 15,940 1,509,848
Stock purchase discount 1,411,407 880,704 880,704 2,292,111
Changes in assets and liabilities:
Increase in accounts receivable (12,935) (2,758) (15,693)
(Increase) decrease in other current assets (6,500) (6,500)
Increase in deposit (1,800) (1,800)
Increase (decrease) in accounts payable 38,054 108,607 (7,125) 169,752
Increase in accrued expenses 4,017 88,007 87,508 195,378
----------- ----------- ---------- --------- -----------
Net cash used in operating activities (837,141) (734,094) (491,494) (32,695) (2,824,418)
----------- ----------- ---------- --------- -----------
Cash flows from investing activities:
Purchase of property and equipment (434,816) (42,304) (747,009)
Purchase of intangible assets (77)
----------- ----------- ---------- --------- -----------
Net cash used in investing activities (434,816) (42,304) (747,086)
----------- ----------- ---------- --------- -----------
Cash flows from financing activities:
Issuance of common stock 1,404,644 652,296 381,059 23,910 3,571,504
----------- ----------- ---------- --------- -----------
Net increase (decrease) in cash 132,687 (124,102) (110,435) (8,785) -
Cash, beginning 200 132,887 132,887 8,785 -
----------- ----------- ---------- --------- -----------
Cash, ending $ 132,887 $ 8,785 $ 22,452 $ - $ -
=========== =========== ========== ========= ===========
Supplemental disclosure of non-cash
financing activities:
Issuance of common stock for services $ 914,462 $ 15,940 $ - $ - $ 1,509,848
=========== =========== ========== ========= ===========
Issuance of common stock for purchase
of subsidiaries $ 337,500 $ 412,500
=========== ===========
F-4
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 1 DESCRIPTION OF BUSINESS
The Company was organized under the laws of the State of Florida
in 1996. The Company is a development stage company, since it has
not completed developing its business processes and systems, which
will accelerate and nurture the growth of start-up companies. The
Company has incurred research and development costs from inception
to March 31, 2001 totaling $779,903. The Company had no
significant revenues from operations since inception and its
ability to continue as a going concern is dependent on the
continuation of financing to fund the expenses relating to
successful development and marketing of its business processes and
systems. Management is currently in negotiations with several
funding sources to provide the working capital necessary to: (i)
finalize such development and (ii) bring them to market, at which
time the Company believes that sufficient cash will be generated
to support its operations. Although management cannot assure the
ultimate success of the above plan, it is reasonably confident
that it will enable the Company to continue its business and grow
modestly.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of
Dynamic Media, Inc. and its wholly owned subsidiaries Webtemps,
Inc., Quick TV, Inc. and Direct Media, Inc. (a Maryland
corporation). Use of estimates and assumptions as determined by
management is required in the preparation of consolidated
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these
estimates and assumptions.
The accompanying unaudited consolidated financial statements as of
March 31, 2001 have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions for Form 10-SB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended
March 31, 2001 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2001. The
unaudited financial statements should be read in conjunction with
the financial statements and footnotes thereto included herein for
the year ended December 31, 2000.
All intercompany accounts have been eliminated in consolidation.
F-5
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of long-lived assets
In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of" ("SFAS 121"), assets are
generally evaluated on a market-by-market basis in making a
determination as to whether such assets are impaired. At each year
end, the Company reviews its long-lived assets for impairment
based on estimated future nondiscounted cash flows attributable to
the assets. In the event such cash flows are not expected to be
sufficient to recover the recorded value of the assets, the assets
are written down to their estimated fair values.
Advertising costs
Advertising costs are charged to expense when incurred.
Advertising expenses were $1,035 and $5,935 for fiscal years 2000
and 1999, respectively. For the three months ended March 31, 2001
and 2000, advertising expenses were $0.
Goodwill
Goodwill represents the excess of the purchase price and related
costs over the value assigned to the net tangible assets of
business acquired. Goodwill is amortized on a straight-line basis
over 5 years. Periodically, the Company reviews the recoverability
of goodwill.
In management's opinion, there was total impairment of the
goodwill on the purchase of Webtemps, Inc. at December 31, 1999.
Amortization expense was $52,500 in 1999.
Equipment and depreciation
Property and equipment are stated at cost. Depreciation is
calculated using the straight-line method over their estimated
useful lives ranging from 3 to 7 years. Depreciation expense for
the years ended December 31, 2000 and 1999 was $76,925 and
$30,332, respectively. Depreciation expense for the three months
ended March 31, 2001 and 2000 was $25,980 and $35,235,
respectively.
Research and development
Research and development costs consist of expenditures incurred by
the Company during the course of planned search and investigation
aimed at the discovery of new knowledge, which will be used to
develop and improve its Internet product. The Company expenses all
such research and development costs as they are incurred.
F-6
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings (loss) per share
In 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 replaced the previously
reported primary and fully diluted earnings per share with basic
and diluted earnings per share, respectively. Unlike the
previously reported primary earnings per share basic earnings per
share excludes the dilutive effects of stock options. Diluted
earnings per share is similar to the previously reported fully
diluted earnings per share. Earnings per share amounts for all
periods presented have been calculated in accordance with
requirements of SFAS No. 128. For the years ended December 31,
2000 and 1999 and the three months ended March 31, 2001 and 2000,
the computation of diluted loss per share was antidilutive;
therefore, the amounts reported for basic and dilutive loss per
share were the same.
Income taxes
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the basis of balance sheet items for financial and income
tax reporting. There is no difference between the basis for
financial and income tax reporting, thus no deferred tax asset or
liability was recorded.
Use of estimates
The preparation of the accompanying financial statements in
conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that directly
affect the results of reported assets, liabilities, revenue and
expenses. Actual results may differ from these estimates.
Capital stock
Issuance of the Company's common stock for remuneration, services
or purchase of subsidiaries is accounted for at the fair market
value of the stock. The Company recognizes a stock purchase
discount expense for those shares in which an investor purchases
the stock for less than fair market value.
Comprehensive income
The Company has adopted SFAS No. 130, Reporting Comprehensive
Income, which requires that all components of comprehensive
income, including net income, be reported in the financial
statements in the period in which they are recognized.
Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income,
including foreign currency translation adjustments, and unrealized
gains and losses on investments, shall be reported, net of their
related tax effect, to arrive at comprehensive income.
F-7
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Segment information
SFAS No. 131, Segment Information, amends the requirements for
public enterprises to report financial and descriptive information
about its reportable operating segments. Operating segments, as
defined in SFAS No. 131, are components of an enterprise for which
separate financial information is available and is evaluated
regularly by the Company in deciding how to allocate resources and
in assessing performance. The financial information is required to
be reported on the basis that is used internally for evaluating
this segment performance. The Company operates in one business
segment: the design, development and marketing of management
related products and services.
Recently issued accounting standards:
In June 1998, the Financial Accounting Standards Board (FASB)
issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS
No. 133 will require the recognition of all derivatives on the
Company's balance sheet at a fair value. The FASB has subsequently
delayed implementation of the standard for the financial years
beginning after June 15, 2000.
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue
Recognition in Financial Statements. In June 2000, the SEC staff
amended SAB 101 to provide registrants with additional time to
implement SAB 101. The Company adopted SAB No. 101 effective
January 2000. The impact of this standard did not have a material
impact on the Company's financial statements.
In March 2000, the FASB issued FASB Interpretation No. 44 (FIN
44), Accounting for Certain Transactions Involving Stock
Compensation. The Company adopted FIN 44 effective July 1, 2000
with respect to certain provisions applicable to new awards,
exchanges of awards in a business combination, modifications to
outstanding awards, and changes in grantee status that occur on or
after that date. FIN 4 addresses practice issues related to the
application of Accounting Practice Bulletin Opinion No. 25,
Accounting for Stock Issued to Employees. The adoption of this
standard did not have a material impact on the Company's financial
statements.
NOTE 3 CAPITAL STOCK
The total number of shares of all classes of stock which the
Company has authority to issue is 21,000,000 shares, consisting of
(a) twenty million (20,000,000) shares of common stock, par value
$.001 per share, and (b) one million (1,000,000) shares of
preferred stock, par value $.001 per share. The preferred stock
may be issued in one or more series, and may have such voting
powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional,
or other special rights and qualifications, limitations, or
restrictions as shall be stated in the resolution or resolutions
providing for the issue thereof adopted by the Board of Directors
of the Company, from time to time.
F-8
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 3 CAPITAL STOCK (continued)
Common stock - $.001 par value, 20,000,000 shares authorized,
9,688,855 and 7,840,855 shares issued and outstanding in 2000 and
1999, respectively. At March 31, 2001, 9,718,855 shares were
issued and outstanding.
Preferred stock - Series A - $.001 per value, 1,000,000 shares
authorized, -0- shares issued and outstanding in 2000, and 1999,
respectively.
NOTE 4 LEASES
The Company leases computer equipment under capital leases. Future
minimum payments under capital leases are as follows:
Year ending
December 31,
------------
2001 $ 35,897
2002 35,897
2003 32,705
2004 1,395
--------
Total minimum lease payments 105,894
Less: amount representing interest 16,445
--------
Present value of net minimum lease payments 89,449
Less: current maturities of obligations under
capital leases 30,625
--------
Long-term obligation under capital leases $ 58,824
========
NOTE 5 INCOME TAXES
The Company and its subsidiaries file a consolidated income tax
returns.
The Company has $4,070,393 in Federal and State net operating loss
carryovers, which can be used to offset future taxable income. The
net operating loss carryforwards expire in the year 2014.
The components of the Company's deferred tax assets are as
follows:
March 31, March 31,
1999 2000 2000 2001
---- ---- --------- ---------
(Unaudited) (Unaudited)
Net operating loss carryforwards $1,002,500 $1,370,000 $1,270,000 $1,425,000
Valuation allowance (1,002,500) (1,370,000) (1,270,000) (1,425,000)
----------- ----------- ----------- -----------
Deferred tax asset $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
F-9
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 6 COMMITMENTS
The Company and its subsidiaries lease office space and equipment
under noncancelable lease agreements expiring at various dates
through 2003 and provide, among other things, for minimum annual
rentals, exclusive of additional rentals which may be required for
increases in certain operating expenses and taxes. The minimum
annual commitments, including estimated additional rentals based
on actual amounts paid during 2000, are as follows:
Years Ending
December 31, Amount
------------ ------
2001 $41,219
2002 42,456
2003 43,729
2004 18,536
Rent expense for the years ended December 31, 2000 and 1999 was
$125,690 and $103,125, respectively. Rent expense for the three
months ended March 31, 2001 and 2000 was $30,441 and $53,293,
respectively.
NOTE 7 FINANCIAL INSTRUMENTS
Concentration of credit risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash.
The Company has concentrated its credit risk for cash by
maintaining substantially all of its depository accounts in a
single financial institution. Accounts in the bank are guaranteed
by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000. At various times throughout the year the Company had
cash balances in this financial institution that exceeded the FDIC
limit. The financial institution has a strong credit rating, and
management believes that credit risk relating to these deposits is
minimal.
Cash approximates its fair value due to the short maturity of the
instruments.
F-10
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 8 ACQUISITIONS
Webtemps, Inc.
On November 12, 1997 the Company acquired 100% of Webtemps, Inc.'s
outstanding common stock by exchanging 300,000 shares of its
common stock valued at $.25 per share. Webtemps, Inc. is a global
temporary staffing service and web page designer. The excess of
the purchase price and related costs over the value assigned to
the net tangible assets acquired was $75,000.
Quick TV, Inc.
On November 1, 1999, the Company formed Quick TV, Inc. with an
investment of $1,000. Quick TV, Inc. was incorporated to operate
the Company's website.
Dynamic Media, Inc. (a Maryland Corporation)
On December 30, 2000 the Company acquired 100% of Dynamic Media,
Inc.'s (a Maryland Corporation) (DMI) outstanding common stock by
exchanging 1,250,000 shares of its common stock valued at $.27 per
share. DMI is a graphics, video and animation developer on any
type media. The excess of the purchase price and related costs
over the value assigned to the net tangible assets acquired was
$337,500.
Pro Forma Information
The figures include amortization of goodwill as if the
acquisitions had taken place on January 1, 1999 and amounted to
$132,498 and $69,811 in 2000 and 1999, respectively.
F-11
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 8 ACQUISITIONS (Continued)
1999 2000
---- ----
Sales $1,270,966 $ 184,817
---------- ----------
Operating expenses:
Selling, general and administrative expenses 4,141,054 2,347,198
Research and development 367,479 --
---------- ----------
4,508,533 2,347,198
---------- ----------
Operating loss (3,237,567) (2,162,381)
---------- ----------
Other income (expense):
Interest income 3,845 1,581
Interest expense (15,497) (12,616)
---------- ----------
(11,652) (11,035)
Net loss $(3,249,219) $(2,173,416)
============ ===========
Loss per share:
Basic $ (.44) $ (.26)
=========== ===========
F-12
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 9 SUBSIDIARY COMPANIES' FINANCIAL INFORMATION
In 1999, the Company had two subsidiaries, which accounted for
more than twenty percent of revenue and/or assets, Webtemps, Inc.
and Quick TV, Inc.
Condensed financial information for Webtemps, Inc. at December 31,
1999:
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
1999
----
Current liabilities $ 2,887
========
Stockholder's deficit:
Common stock 1,000
Additional paid-in capital 27,975
Accumulated deficit (31,862)
---------
(2,887)
---------
$ 0
========
STATEMENTS OF OPERATIONS
Sales $ 22,999
Operating costs and expenses (24,317)
--------
Net loss $ (1,318)
========
STATEMENTS OF CASH FLOWS
Cash flows provided by operating activities $ (2,135)
Cash flows used in investing activities
Cash flows from financing activities
--------
Net increase (decrease) in cash $ (2,135)
========
F-13
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999 AND MARCH 31, 2001
NOTE 9 SUBSIDIARY COMPANIES' FINANCIAL INFORMATION (Continued)
Condensed financial information for Quick TV, Inc. at December 31,
1999:
BALANCE SHEETS
ASSETS
1999
----
Current assets $ 50,940
Other assets
--------
$ 50,940
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $ 97,954
--------
Stockholder's deficit:
Common stock 1,000
Accumulated deficit (48,014)
--------
(47,014)
--------
$ 50,940
========
STATEMENTS OF OPERATIONS
Sales $ 50,000
Operating costs and expenses (98,014)
--------
Net loss $(48,014)
========
STATEMENTS OF CASH FLOWS
Cash flows provided by operating activities $ 49,940
Cash flows used in investing activities
Cash flows from financing activities 1,000
--------
Net increase (decrease) in cash $ 50,940
========
F-14
DYNAMIC MEDIA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
NOTE 10 LEGAL PROCEEDINGS
In 1997 the Company, formerly Dynamic Imaging Systems Corporation
(Dynamic Imaging) entered into a Common Stock Exchange Agreement.
Pursuant to the Agreement, Dynamic Imaging issued 500,000 shares
of its authorized common stock to the shareholders of the
companies. Dynamic Imaging rescinded the transaction and canceled
the stock in October 1997 when it was determined that the
companies and their shareholders had, among other things,
materially misrepresented their respective interests in certain
intellectual property. The shareholders seek to recover the value
of the canceled stock and other damages for what they contend was
a breach of the agreements. The Company has counterclaimed against
the plaintiffs. It is aggressively defending the claims against it
and is aggressively pursuing its counterclaims. Because this case
is in the early stages of motion practices and pretrial discovery,
the Company's legal counsel cannot predict the outcome of the
litigation.
F-15
SUBSCRIPTION AGREEMENT
FOR
DYNAMIC MEDIA, INC.
COMMON STOCK ($2.00 PER SHARE)
Persons interested in purchasing common stock of Dynamic Media, Inc. must
complete and return this Subscription Agreement along with their check or money
order to:
DYNAMIC MEDIA, INC
2000 HAMILTON STREET
SUITE 596
Philadelphia, PA 19130
("the Issuer") ("the Company")
Subject only to acceptance hereof by the issuer, in its discretion, the
undersigned hereby subscribes for the number of common shares and at the
aggregate subscription price set forth below.
An accepted copy of this Agreement will be returned to the Subscriber as a
receipt, and the physical stock certificates shall be delivered to each Investor
within thirty (30) days of the Close of this Offering.
SECURITIES OFFERED - The Company is offering 2,000,000 shares (par
value $.001 per share) at $2.00 per share.
SUBSCRIPTION - In connection with this subscription the undersigned
hereby subscribes to the number of common shares shown in the following table.
NUMBER OF COMMON SHARES = ______________________
MULTIPLY BY PRICE OF SHARES x $2.00 Per Share
------------------------
AGGREGATE SUBSCRIPTION PRICE = $_____________________
Check or money order shall be made payable to DYNAMIC MEDIA, INC.
In connection with this investment in the Company, I represent and warrant as
follows:
a) Prior to tendering payment for the shares, I received a copy of and read your
prospectus dated __________________, 2001.
b) I am a bona fide resident of the state of ___________________________.
c) The Issuer and the other purchasers are relying on the truth and accuracy of
the declarations, representations and warranties herein made by the undersigned.
Accordingly, the foregoing representations and warranties and undertakings are
made by the undersigned with the intent that they may be relied upon in
determining his/her suitability as a purchaser. Investor agrees that such
representations and warranties shall survive the acceptance of Investor as a
purchaser.
Please register the shares which I am purchasing as follows:
Name: _______________________________________ Date:_____________________________
As (check one)
[_] Individual [_] Tenants in Common [_] Existing Partnership
[_] Joint Tenants [_] Corporation [_] Trust
[_] Minor with adult custodian under the Uniform Gift to Minors Act
For the person(s) who will be registered shareholder(s):
Signature of Subscriber Residence Address
- ------------------------------------------- ---------------------------------
Name of Subscriber (Printed) City or Town
- ------------------------------------------- ---------------------------------
Signature of Co-Subscriber State Zip Code
- ------------------------------------------- ---------------------------------
Name of Co-Subscriber (Printed) Telephone
- ------------------------------------------- ---------------------------------
Subscriber Tax I.D. or Co-Subscriber Tax I.D. or
Social Security Number Social Security Number
- -------------------------------------------
E-mail Address (if available)
- ------------------------------------------------------------------------------
ACCEPTED BY: DYNAMIC MEDIA, INC.
By: Date
------------------------------ -----------------------------------
Officer
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Amended Articles of Incorporation provide for indemnification of our
officers and directors. They state that, to the fullest extent permitted by law,
none of our directors or officers will be personally liable to us or our
shareholders for damages for breach of any duty owed to us or our shareholders.
According to our Amended Articles of Incorporation, we have the power, in our
Bylaws or in any resolution of our shareholders or directors, to undertake to
indemnify our officers and directors against any contingency or peril as may be
determined to be in our best interests, and in conjunction therewith, to
procure, at our expense, policies of insurance. Our Bylaws do not specifically
provide for indemnification of our officers or directors.
We have no arrangements specifically providing for indemnification of our
officers or directors, and we have no arrangements for the indemnification of
any controlling persons.
Our Amended Articles of Incorporation provide for indemnification of our
officers and directors regardless of the criminal or intentional nature of the
wrongful activity undertaken, but (i) only so far as such indemnification is
determined to be in our best interests and (ii) only to the extent not
prohibited by applicable Florida law.
The Florida Business Corporation Act requires that the officer or director who
was or is a party to any proceeding, including an action by, or in the right of,
the corporation, to have acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation.
Even if the officer or director satisfies the foregoing mental state
requirements, the Florida Business Corporation Act may further limit the right
of the officer or director to indemnification or the amount of indemnification
which he has the right to receive. For instance, indemnification is not
available to any director or officer if the court establishes that actions or
omissions to act of such director or officer constitute: (1) a violation of the
criminal law, unless the director or officer had reasonable cause to believe
that his conduct was lawful or had no reasonable cause to believe that his
conduct was unlawful, (2) a transaction from which the director or officer
derived an improper personal benefit, (3) in case of a director, a circumstance
under which the director is liable for an unlawful distribution, or (4) willful
misconduct or a conscious disregard for the best interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors or officers pursuant to the foregoing provisions,
we have been informed 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 such director,
officer, or controlling person asserts a claim for indemnification by us against
such liabilities (other than our payment of expenses incurred or paid by a
director, officer, or controlling person of ours in the successful defense of
any action, suit, or proceeding) in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against pubic policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-1
INDEMNIFICATION OF DIRECTOR AND OFFICER
The Florida General Corporation Law permits indemnification by the Company of
any director, officer, employee or agent of the Company or person who is serving
at the Company's request as a director, officer, employee or agent of another
corporation, or other enterprise, as set forth in the statute which appears on
the next page.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall, to the fullest extent permitted by the laws of the State of Florida,
indemnify any director, officer and employee of the Corporation against expenses
incurred by such person by reason of the fact that he serves or has served the
corporation in such capacity.
The Company's Bylaws provide that the Company shall, to the fullest extent
permitted by the laws of the State of Florida, indemnify each officer or
director against expenses (including attorney's fees), judgments, taxes, fines
and amounts paid in settlement incurred by him in connection with, and shall
advance expenses (including attorney's fees) incurred by him in defending, any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) through which he is, or is threatened
to be made, a party by reason of his being a director or officer of the Company,
or his serving or having served at the request of the Company as a director,
officer, partner, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Indemnification under the Company's Articles of Incorporation and Bylaws is
nonexclusive of any other right such persons may have under statute, agreement,
bylaw or action of the Board of Directors or shareholders of the corporation.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Filing Fee ....................................... $ 1,100
Printing Costs (including stock certificates)* ....... 28,000
Legal fees and expenses* ............................. 50,000
Accounting fees and expenses* ........................ 20,000
Blue Sky fees and expenses* .......................... 4,000
--------
TOTAL $103,100
========
* Indicates expenses that have been estimated for the purpose of this filing.
RECENT SALES OF UNREGISTERED SECURITIES.
The following securities were sold by the Company within the past three (3)
years and prior to the date of filing of this registration statement. There were
no underwriting discounts or commissions paid in connection with the issuance of
any of these securities except as indicated below. No officers or directors of
the Company received any commissions.
Unless otherwise indicated, the sales set forth above are claimed to be exempt
from registration with the Securities and Exchange Commission pursuant to
Section 4(2) of the Securities Act of 1933, as amended, as transactions by an
issuer not involving any public offering, because (a) said transactions involved
the issuance and sale by the Company of securities to financially sophisticated
individuals who at the time of purchase were fully aware of the Company's
activities, as well as its business and financial condition, (b) there was no
advertising for or general solicitation of investors, and (c) when said
securities were acquired for investment purposes, investors understood the
ramifications of same. All certificates representing the shares issued by the
Company as set forth herein, which are currently outstanding, have been properly
legended.
II-2
Dynamic Media, Inc.
Sale of Restricted Shares 1998
In August, September and October 1998 the following 10 people acquired
233,818 shares of restricted stock for the aggregate sum of $437,240.
NUMBER OF
DATE NAME SHARES SOLD
08/24/98 Ewa Balcer 7,377 Restricted
08/24/98 Susan Brauser 14,754 Restricted
08/24/98 Bernice Brauser 81,147 Restricted
09/03/98 Wilfred Gaier 7,377 Restricted
09/03/98 Dawn Lambertus 14,754 Restricted
09/03/98 Greg H. Waldrip 16,393 Restricted
10/13/98 Sherry Doyle 10,000 Restricted
10/13/98 Virginia Waldrip 59,016 Restricted
10/13/98 Timothy G. Waldrip 13,000 Restricted
10/13/98 Gerald & Sheila Mark 10,000 Restricted
-----------
Total 233,818
Dynamic Media, Inc.
Stock Issued
For the Year Ended December 31, 1999
Number of Date
Name Shares Issued $ Amount
- ----------------------------------------------------------------------------------------------------
Advanced Corporate Technology 650,000 1/4/99 1,057,144 Restricted
Albany Holdings S.A. 20,000 1/19/99 118,750 Restricted
Webworks Multimedia 20,000 1/19/99 118,750 Restricted
Beta Industries S.A. 20,000 1/19/99 118,750 Restricted
John E. Davies 10,000 1/19/99 59,375 Restricted
Lance Morginn 20,000 1/19/99 118,750 Restricted
Thomas J. Whalen, D.O. 100,000 1/22/99 518,750 Restricted
MacGyver Enterprises Ltd. 20,000 1/28/99 95,000 Restricted
Larry Wallison 10,000 1/29/99 56,875 Restricted
Harry J. Addesso Trust 20,000 2/19/99 68,750 Restricted
MacGyver Enterprises Ltd. 40,000 5/25/99 172,500 Restricted
Albany Holdings S.A. 50,000 5/25/99 215,625 Restricted
Beta Industries S.A. 22,500 5/25/99 97,031 Restricted
--------- ---------
Totals 1,002,500 2,816,050
========= =========
Dynamic Media, Inc.
Stock Issued
For the Year Ended December 31, 2000
Number of Date
Name Shares Issued $ Amount
- ----------------------------------------------------------------------------------------------------
Bethany Ventures, Inc. 34,000 1/2/00 89,250 Restricted
Advanced Corporate Technology 550,000 1/2/00 1,443,750 Restricted
Leading Edge Design 625,000 12/30/00 168,750 Restricted
Purchase of
Subsid.
Duane A. Tucker 525,000 12/30/00 141,750 Restricted
Purchase of
Subsid.
Andrew F. Tucker 100,000 12/30/00 27,000 Restricted
Purchase of
Subsid.
--------- ---------
Totals 1,834,000 1,870,500
========= =========
II-3
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION
5 Opinion and Consent of Terry R. Fields, Esquire
10.1 Articles of Incorporation (to be filed by Amendment)
10.2 By-Laws (to be filed by Amendment)
23.1 Consent of Larson Allen Weishair & Co., LLC
UNDERTAKINGS
The undersigned registrant undertakes:
(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this registration statement
To include any prospectus required by section I O(a)(3) of the
Securities Act of 1933;
To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information in the
registration statement;
To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to the information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of securities at that time shall be deemed to be the
initial bona fide offering.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission any supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities
available to any director or officer if the court establishes that actions or
omissions to act of such director or officer constitute: (1) a violation of the
criminal law, unless the director or officer had reasonable cause to believe
that his conduct was lawful or had no reasonable cause to believe that his
conduct was unlawful, (2) a transaction from which the director or officer
derived an improper personal benefit, (3) in case of a director, a circumstance
under which the director is liable for an unlawful distribution, or (4) willful
misconduct or a conscious disregard for the best interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors or officers pursuant to the foregoing
provisions, we have been informed 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 such
director, officer, or controlling person asserts a claim for indemnification by
us against such liabilities (other than our payment of expenses incurred or paid
by a director, officer, or controlling person of ours in the successful defense
of any action, suit, or proceeding) in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against pubic policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, this
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in the City of
Philadelpha, State of Pennsylvania, on July 10, 2001
(Registrant) DYNAMIC MEDIA INC.
-------------------
By /s/ Ian D. Jones
--------------------------------------
Ian D. Jones, President and Director
In accordance with the Securities Act of 1933 this registration was
signed by the following persons in the capacities and on the dates indicated.
(Signature) /s/ Craig Hope
--------------------------------------
Craig Hope
Vice President and Director
(Date) July 10, 2001
--------------------------------------
(Signature) /s/ Sidney J. Pine
--------------------------------------
Sidney J. Pine
Vice President, Chief Financial
Officer and Director
(Date) July 10, 2001
--------------------------------------
/s/ Myron Yanoff, M.D.
--------------------------------------
Myron Yanoff, M.D.
Director
(Date) July 10, 2001
--------------------------------------
/s/ Dominic Castaldo, D.D.S.
--------------------------------------
Dominic Castaldo, D.D.S.
Director
(Date) July 10, 2001
--------------------------------------
Who must sign: the small business issuer, its principal executive
officer or officers, its principal financial officer, its controller or
principal accounting officer and at least the majority of directors or
persons performing similar functions.
For Office Use Only:
Broker/Dealer Name & Address Investor:
------------------------------------
Investor #:__________________
II-5