As filed with the Securities and Exchange Commission on
, 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
-------------------------------------
Amendment No. 1
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOOKDIGITAL.COM, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-3655703
(State of Jurisdiction) (Primary Standard Industrial (I.R.S.
Classification Code Number Employee
Identification
No.)
65 Broadway
New York, New York 10006
(212) 430-6380
(Address and telephone number of principal executive offices
and principal place of business)
-------------------------------------
Don L. Rose, Chief Executive Officer
Bookdigital.Com, Inc.
65 Broadway
New York, New York 10006
(212) 430-6380
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
Copies of all communications to:
Joel Schonfeld, Esq.
Andrea I. Weinstein, Esq.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, New York 10005
(212) 344-1600/Fax: (212) 480-0717
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 Section 8(a), may
determine.
CALCULATION OF REGISTRATION FEE
Title of Each Amount Being Proposed Maximum Proposed Amount of
Class of Registered Offering Maximum Registration
Securities Price per Share Aggregate Fee
Offering
Price
Total 1,200,000 $10.00 $12,000,000 $3,636.36
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to 457.
Cross Reference Sheet
Showing the Location In Prospectus of
Information Required by items of Form SB-2
Part I Information Required in Prospectus Item No.
1. Front of Registration Statement Front of
and outside front cover of Registration
Prospectus Statement and
outside
front cover of
Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and
Outside
Front cover Page of
Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors High Risks Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary-
Determination of
Offering Price; High
Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of
Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal
Stockholders
Beneficial Owners and Management
Part I Information Required in Prospectus Caption in
Prospectus
12. Description of Securities Description
of
Securities
13. Interest of Named Experts and Legal
Opinions;
Experts
Counsel
14. Disclosure of Commission Position Statement as to
on Indemnification Indemnification
for
Securities
Act Liabilities
15. Organization Within Last Management,
Five Years Certain
Transactions
16. Description of Business Business
17. Management's Discussion and Management's
and Analysis or Plan of Discussion
Operation and Analysis
18. Description of Property Property
19. Certain Relationships and Related Not Applicable
Transactions
20. Market for Common Stock and Prospectus Summary
Related Stockholder Matters Market for
Registrant's
Common Stock and Related
Stockholders Matters;
Shares Eligible for
Future Sale.
21. Executive Compensation Executive
Compensation
22. Financial Statements Financials
Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
1,200,000 SHARES OF COMMON STOCK
BOOKDIGITAL.COM, INC.
Bookdigital.com, Inc., a Delaware corporation ("Bookdigital," "our,"
"we," or "us") is offering 1,200,000 shares of common stock. Prior
to this offering, there has been no public market for the securities, and
there can be no assurance that such a market will develop or be sustained.
We urge you to read the "Risk Factors" section beginning on page
along with this prospectus before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
Per Share Total
Initial public offering price $
Underwriting discounts and commissions $
Proceeds $
The shares are being offered by the underwriters subject to
receipt and acceptance by the underwriters and subject to their
right to reject any order in whole or in part. We have granted to the
underwriters a 45 day option to purchase up to 180,000 additional shares to
cover over-allotments.
We estimate that the maximum offering price will be between $10.00 and
$12.00 per share
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
First Madison Securities, Inc.
Westphalia Investments, Inc.
The date of this prospectus is .
This Offering will terminate on January 1, 2000, but may be extended for
an additional sixty days at Bookdigital's option.
TABLE OF CONTENTS
PAGE
Prospectus Summary
Selected Financial Data
Risks Factors
Use of Proceeds
Capitalization
Dilution
Management's Discussion and Analysis of Financial Condition
Business
Management
Principal Shareholders
Description of Securities
Shares Eligible for Future Sale
Underwriting
Legal Matters
Experts
Index to Financial Statements
BOOKDIGITAL.COM, INC.
Bookdigital is a development stage company which provides electronic
access to books and other reference material on the Internet. We provide such
books and materials through our web site, www.Bookdigital.com. We are also
in the process of developing a legal reference site, www.LawxpressUSA.com,
which we expect to market to attorneys, law libraries, law students and anyone
else interested in legal research. All our material is provided in a
readily accessible, convenient and user friendly format.
The principal executive offices of Bookdigital are located at 65
Broadway, New York, New York 10006. Our phone number is 212-430-6380. Our
web site is located at www.Bookdigital.com. Nothing contained on our web site
should be construed as part of this prospectus.
The Offering
The following figures do not include shares issuable upon exercise of
370,800 outstanding warrants nor do they reflect the underwriter's warrants.
Securities Offered...................................1,200,000
Shares of Common Stock.
Shares of common stock
Outstanding before offering ................... 5,175,200
Shares of common stock
Outstanding after offering......................6,375,200
__________
Risk Factors
The securities offered hereby are highly speculative and involve a high
degree of risk. Carefully review and consider the factors set forth under
"Risk Factors" as well as all other information contained herein.
Use of Proceeds
The net proceeds from this offering, estimated to be approximately
$10,440,000, will be used to expand sales and marketing activity, further
develop the law e-library purchase hardware and software, and for
working capital and general corporate purposes. For more information, please
refer to "Use of Proceeds" on page .
RISK FACTORS
We have limited operation history; we anticpate future losses.
Bookdigital.com, Inc. was incorporated on March 25, 1999 pursuant to the
laws of the State of Delaware. To date, Bookdigital has generated limited
revenues. Since incorporating, we have devoted our efforts to various
organizational activities, including our effort to build our web site and
conduct a private placement in which we raised gross proceeds of $963,600.
As of May 31, 1999 Bookdigital had an accumulated net deficit of $18,436,
and we anticipate that we will incur net losses for the foreseeable future.
The extent of these losses will be dependent, in part, on our ability
to attract and build a membership base, to generate sales and advertising
revenues, and to offer products and services at competitive prices. We expect
our operating expenses to increase, especially in the areas of sales and
marketing and brand promotion, and, as a result, we will need to commence
operations and generate revenue, and to offer products and services at
competitive prices if profitability is to be achieved.
We depend on key personnel, the loss of whom could have a material adverse
effect on our business.
Our success will be substantially dependent on the performance of our
executive officers, Zahra S. Yamani (President), Don L. Rose (CEO), and Susan
L. Schuler (Secretary), who have worked together only a short period of time,
and on the marketing personnel we intend to hire. The loss of the services of
any of our executive officers could have a material adverse effect on our
business, results of operations and financial condition. Competition for
senior management, experienced media sales and marketing personnel, qualified
Web engineers and other employees is intense, and there can be no assurance
that we will be successful in attracting and retaining such personnel. Our
failure to successfully manage our personnel requirements would have a
material adverse effect on our business, results of operations and financial
operations and financial condition. We currently have no Key-Person life
insurance on any of our executive officers. We have entered into employment
agreements with Zahra Yamani, our President, Don L. Rose, our CEO, and Susan
L. Schueler, our Secretary. within the next twelve months, we intend to
hire 30 full/part time employees at an anticipated annualized cost of
$800,000.
Resale may be difficult
Prior to this offering, there has been no public market for our common
stock or other securities. The initial public offering price of the common
stock has been arbitrarily determined by Bookdigital and is not necessarily
related to our assets, book value, results of operations, or any other
established criteria of value. There can be no assurance that an active
trading market for the common stock will develop, or be sustained if developed
following the closing of the offering.
While we intend to hire public relations firms, investors firms and hold
investor meetings to help establish a market for Bookdigital's securities, we
can not guarantee that such action will be successful. As a result, resale
securities purchased in this offering may be difficult.
Arbitrary Determination of Offering Price.
The initial offering will be arbitrarily determined by Bookdigital and
the Underwriters, and bears no relationship whatsoever to our assets,
earnings, book value or any other objective standard of value. Among the
factors we will consider are the lack of operating history of Bookdigital, the
proceeds to be raised by the offering, the amount of capital to be contributed
by the public in proportion to the amount of stock to be retained by present
stockholders, our relative requirements, and the current market conditions in
the over-the-counter market.
Shares eligible for future sale.
Upon completion of this offering, Bookdigital will have outstanding
6,375,200 shares of common stock, excluding 370,800 shares, issuable upon
exercise of outstanding warrants. Of the 6,375,600 issued and outstanding
shares of our common stock, approximately 5,175,600 shares may be
deemed "restricted shares." The restricted shares were issued by Bookdigital
in private transactions in reliance upon one or more exemptions contained in
the Securities Act of 1933. Restricted securities may, in the future, be sold
in compliance with Rule 144 under the Securities Act.
Rule 144 provides that a person holding restricted securities for a
period of one year may sell in brokerage transactions an amount equal to 1% of
our outstanding common stock every three months. A person who is a "non-
affiliate" of Bookdigital and who has held restricted securities for over two
years is not subject to the aforesaid volume limitations as long as the other
conditions of the Rule are met. Possible or actual sales or our common stock
by certain of our present stockholders under Rule 144 may, in the future, have
a depressive effect on the price of our common stock in any market which may
develop for such shares. Such shares would be eligible for sale within one
year under Rule 144, subject to certain volume restrictions and other
conditions imposed thereby) commencing in March 2000.
Our management will have broad discretion to allocate offering proceeds.
Although Bookdigital has generally provided for the use of the proceeds
from this offering, as of the date of this prospectus, we cannot specify with
certainty the amount of the net proceeds of the offering which will be
allocated for each purpose. Accordingly, Bookdigital's management will have
broad discretion in the application of the net proceeds. Holders of
Bookdigital securities may not agree with our allocation of the proceeds of
this offering.
We may need, and may be unable to obtain additional financing.
We anticipate that if this entire offering is sold we will have
sufficient capital to meet our needs for working capital and capital
expenditures for at least the next 12 months. After 12 months we may need to
raise additional funds through a private or public offering of our securities
in order to fund our operations while we build our subscriber base. If
additional funds are raised through the issuance of equity or convertible debt
securities, the new holders may have preferences or privileges senior to those
of the rights of Bookdigital's securities. There can be no assurance that
additional capital will be available or available on acceptable terms.
Bookdigital may not be able to fund its future operations, promote our brand
as we desire, take advantage of unanticipated acquisition opportunities,
develop or enhance services or respond to competitive pressures. Any such
inability could have a material adverse effect on our business, results of
operations and financial condition.
Inside shareholders will continue to control Bookdigital after this
offering.
Prior to this offering, inside shareholders, including management of
Bookdigital, owned 90.7% of outstanding Bookdigital common stock. After this
offering, inside shareholders will own 73.6% of the outstanding Bookdigital
common stock. As a result, these insiders will continue to control the
company, and will continue to be able to elect all of Bookdigital/s directors,
appoint its officers and control Bookdigital's affairs and operations.
Bookdigital's articles of incorporation do not provide for cumulative voting.
USE OF PROCEEDS
The net proceeds that we will receive from the sale of the 1,200,000 shares of
common stock are estimated to be approximately $10,440,000, assuming an
initial public offering price of $10.00 per shares, after deducting
underwriting discounts and commissions and estimated offering expenses.
We intend to apply these net proceeds as follows:
Approximate Amount Percentage
of
Of Net Proceeds Net Proceeds
Sales and Marketing $ 4,000,000 39.1%
Site Development Law
(LawxpressUSA.com) $ 1,600,000 15.6%
Site Development-Reference
materials in Spanish, Italian $ 1,850,000 18.1%
German, French
Hardware and Software $ 350,000 3.4%
Working Capital (including $ 2,440,000 23.8%
rent, payroll and office express)
Total $ 10,440,000 100%
CAPITALIZATION
CAPITALIZATION
The following tables sets forth the capitalization at May 31, 1999 on an
actual basis and as adjusted to give effect to the sale of 1,200,000 units at
an initial public offering price of 10,00 per share and receipt of the net
proceeds. This table should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus.
May 31, 1999
Actual As Adjusted
Short term Debt $ 322,562 $ 322,562
Stockholder's Equity
Common Stock, $.001 par
value, 20,000,000 shares
authorized, 5,175,200
shares issued and
outstanding; 6,375,200
shares issued and
outstanding as adjusted 5,175 6,3755
Paid-in Capital 2,461,934 14,461,934
Accumulated Deficit (45,908) (45,908) <?R>
Total Shareholder's
Equity
2,421,201 14,421,201
Total Capitalization $2,743,763 14,743,763
DILUTION
At May 31, 1999, Bookdigital had a net tangible book value of $800,345
or approximately $.15 per share of common stock. Net tangible
book value per share is equal to Bookdigital's tangible asset less its total
liabilities, divided by the number of shares of common stock outstanding on
such date. After giving effect to the sale of 1,200,000 units and the receipt
of estimated net proceeds, assuming an initial offering price of $8.70 (after
deduction of underwriting discounts and commissions), the proforma net
tangible book value at May 31, 1999 would have been $11,240,345 or $1.76
per share of common stock.
This represents an immediate increase in net tangible book value of $1.61
per share of common stock to the existing shareholders an immediate
dilution of $8.24 share of common stock to new investors.
The following table illustrates the per share dilution:
Assumed initial offering price $10.00
Net tangible book value per share .15
Increase attributable to new investors 1.61
Adjusted net tangible book value after offering 1.76
Dilution per share to new investors 8.24
Dilution as a percentage of offering price 82%
The following table sets forth on a proforma basis as of May 31, 1999,
including the offering.
Shares
purchased
Number % Total
consideration
Amount % Average Price
Per Share
Existing
Shareholders
5,175,200 81 $ 971,064 9 $ .19
New
Investors
1,200,000 19 12,000,000 91 10.00
Total
6,375,200 100 12,971,064 100 2.035
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
The following discussion and analysis provides information that we
believe is relevant to an assessment and understanding of our results of
operations and financial condition for the two months ended May 31, 1999. The
following discussion should be read in conjunction with the Financial
Statements and related Notes appearing elsewhere in this prospectus.
Overview
Since beginning operations in March 1999, we have devoted substantially
all of our resources to designing and implementing our web site and organizing
and collecting reference materials for our web site. From inception through
May 31, 1999 we raised total equity capital of $963,600 and had an accumulated
deficit of $18,436. We have not yet begun to receive revenues from sales of
services. We except to operate at a loss for the first six to twelve months
following the commencement of sales of our services as we incur increasing
levels of expense to support growth.
We believe that an initial operating loss will not be indicative of
future performance for the following reasons, among others:
The receipt of the proceeds of this offering and their use to fund
our anticipated growth will materially change expense levels in
all major categories and are expected to support substantial
increases in revenues from operations; and
We have recently emerged from the development stage and anticipate
rapid increases in the number and size of site visitors and
advertising revenues.
Although we expect substantial growth in both revenues and expenses, we
anticipate that increases in expenses will occur more rapidly than
corresponding increases in revenues. Also, while we are committed, at least
in the short term, to substantial increases in expenses, we cannot guarantee
that revenues will increase correspondingly. Like many companies attempting
to build an Internet-based business, we expect that for at least the next
year, and for an indeterminate period of time thereafter, to follow a strategy
of establishing market share by making expenditures for marketing and
infrastructure development that exceed current revenues.
Bookdigital
Results of Operations. For the two months ended May 31, 1999, we had
$70,278 in total revenues, all of which were derived from gain or sales of
investments and interest, and incurred total expenses of $88,714. Expenses
consisted of$12,130 of research and development expenses and $36,224 of
general and administrative expenses. We have incurred organization costs of
$152,283. We expect to expend approximately $3,800,000 during the next 12
months.
Liquidity and Capital Resources. We have funded our operations
primarily through the sale of common stock and warrants. From inception
through May 31, 1999, we raised approximately $963,600 from sales of units for
cash. Each unit consists of one share of common stock and one common stock
purchase warrant. Each warrant is exercisable for one share of common stock
at 120% of the price per share in this offering for two year period commencing
March 30, 1999. In some cases, we have issued common stock in return for
goods or services. As of May 31, 1999, we had a total of $322,561 of
outstanding notes and other obligations for money borrowed, and cash and cash
equivalents of $1,107,107. We have described the effect of this offering on
our capital resources and our anticipated uses of those resources under "Use
of Proceeds" on page .
Year 2000 Compliance
There are issues associated with the programming code in existing
computer systems as the Year 2000 approaches. The "Year 2000 problem" is
pervasive and complex, as virtually every computer operation will be affected
in some way by the rollover of the two digit year value to 00. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail. We have evaluated our current systems, purchased
necessary upgrades and believe that our current hardware and software is Year
2000 compliant. Similarly, we believe that the services we offer to our
customers are not affected by the Year 2000 problem. We have evaluated the
potential impact on us of a Year 2000 problem on the part of our important
third party vendors and have found none. We plan to continue to evaluate our
systems and those of our important vendors in an effort to minimize the
effects of a Year 2000 problem. We do not anticipate that the Year 2000
problem will have a material impact on our business or operations.
BUSINESS
The discussion in this Prospectus contains certain forward-looking
statements. The outcome of events described in such forward-looking
statements is subject to risks and uncertainties. Bookdigital's actual
results may differ materially from those discussed in such forward-looking
statements. Factors that may cause or contributed to such differences include
those discussed in "Risk Factors," "Management's Discussion and Analysis" and
"Business" as well as those discussed elsewhere in this Prospectus.
Information contained at Bookdigital's web site,
www.Bookdigital.com, does not constitute a part of this prospectus. This
prospectus includes statistical data regarding the Internet industry. Such
data is taken or derived from information published by sources including the
Wall Street Journal, Jupiter Research, Visa International Studies and Ziff-
Davis Marketing Intelligence. Although we believe that such data is generally
indicative of the matters reflected therein, such data may be imprecise and
investors are captioned not to place undue reliance on such data.
Our goal is to become a one-stop e-library reference source for
various subjects, with a focus on legal research. . We believe that we
can provide a valuable tool for people conducting research via the
Internet by collecting all available reference material on numerous subjects
and allowing viewers to access it through a single web site. We have designed
our web site so that a viewer will not have to utilize various search engines
on the Internet when performing research or trying to locate a single book.
By logging onto www.Bookdigital.com, a person will be able to quickly and
efficiently access the most pertinent reference material available on a
particular subject and then access or download it onto his/her hard drive or
print a hard copy. Books and other reference materials are categorized in a
user friendly format, further simplifying research. Viewers may search by
title, subject, key word or author. We believe that the Internet is providing
users with the opportunity for easier and more up to date research, and it
will become increasingly acceptable as a means of research. We expect that
the following categories of people, among others, will find Bookdigital's web
site an important reference and data source:
Professionals
Students
Lawyers
Scientists
Medical Professionals
Anyone seeking knowledge.
Bookdigital.com seeks to become the premier on-line source for reference
books and data by :
Offering easy access to a wide variety of reference materials in many
subject areas
Providing the general reference service free of charge
Continuing to expand access to updated reference books and materials
Marketing our service and engaging in cross-marketing with complementary
companies and services
Developing strategic alliances with other web sites and content
providers
Pursuing acquisitions, joint ventures and similar strategic investments
and relationships with complementary businesses and companies.
Investing in technology to further develop state of the art product and
services.
We will offer unlimited use of our on-line research library
free of charge. We are in the process of developing certain categories
within our e-library, for which we will charge fees. The
first of these planned categories is law. We intend to furnish our law e-
library with current court decisions, rulings and laws in all areas of the
law, both State and Federal. Our law research site, www.LawxpressUSA.com,
is currently under development. We expect that site to be available to
subscribers by January 2000. .
Bookdigital was incorporated on March 25,1999. Bookdigital provides
access to all types of reference books and materials on the Internet in a
digital format that is both easy to use and easy to read. We also provide
links to other categorized premier sites in the subject area. We seek to
maximize the number of visitors to our web site by providing the best service
and content available in the reference and digital book arena. We currently
have in excess of 6,000 volumes in English for our digital book
selection. We anticipate that our digital library will eventually surpass one
million books, and will consist of books in languages such as English,
Spanish, French, German, Italian, Japanese and Chinese. To access a book or
other reference material, all a viewer has to do is to click on the screen.
Bookdigital intends to become the premier e-library and source for
reference and digital books on the Internet. No longer will a person have to
search the Internet via Yahoo, Lycos or some other search engine to find text
dealing with the desired subject. A viewer can go to our Web site, find the
material desired and get instant access to the subject then download an entire
book or series of articles to his/her computer. Bookdigital intends to become
a one-stop reference source. Sources available on our Web site,
www.bookdigital.com, will range from classic literature needed for book
reports (Plato, Mark Twain etc.), to reference materials on law, medicine,
chemistry and more obscure areas such as geophysics. The books and reference
materials are categorized on the web site in an easy to find manner and can be
downloaded from Bookdigital's Web site in a user friendly accessible format.
We have entered into many revenue sharing strategic "alliances" with
complimentary companies such as Staples, Sharper Image, Borders, Omaha Steaks,
and other vendors. A link is established with allied companies to
transport the user to the desired site. A percentage of the ensuing sale is
the normal compensation.
Bookdigital will also actively seek to acquire complimentary
technologies or companies that will grow or expand our business. Furthermore,
the company may invest in other Internet companies that meets its objectives.
As of the date of this prospectus, there are no pending or contemplated
acquisitions.
Products and services
LawXpressUSA.com. Bookdigital is in the process of developing a
legal reference and research web site. By accessing www.lawxpressusa.com,
subscribers will be able to find current statutes, court decisions ,
ordinances and regulations, both state and federal. We intend to make
research as easy as possible for the legal practitioner by utilizing simple
subject-based search engines. It is our goal to provide lawyers, researchers,
law students and others with an easily accessible reference site at a
subscription fee much less than current on-line legal services.
Reference Materials. Bookdigital intends to become the premier
source of reference material on the Web, with an emphasis on up to date
legal reference material. We have obtained, and will continue to obtain,
reference material on a variety of subjects, from astrology to zoology. We
believe that compiling a wealth of information on each topic on a single Web
site will offer subscribers an easy, time-efficient and cost efficient way to
conduct research. Currently, most on-line reference materials are scattered
through numerous Web sites. We believe our site is the first Web site to
condense and concentrate reference materials to such a level in a single
location, www.lawxpressusa.com. We will seek to further attract
those conducting research, by establishing several sub super e-libraries,
within our main reference e-library. The first sub super e-library will be
our law e-library which we expect will contain up to the minute court
decisions, rulings, laws and regulations, in state and federal law. Our
law e-library will be located at a separate web site, www.lawxpressusa.com.
We expect that site to be operational and subscriber-ready by January 2000.
If we are successful in developing these sub super e-libraries, we will
then begin to immediately solicit subscribers for those specific subjects
.
Digital Books. Bookdigital will be supplying access to digital books on
our Web site. Books are currently available in English language only. We
intend to expand into additional languages such as Spanish, German, French,
Italian, Japanese and Chinese in the near future. Downloadable books are
creating a new evolution for book publishing by transforming electronic text
and data to digital technology, digital characters, page layout, and
numbering. Some of the advantages of digital books are:
* The user can create an electronic book library on his/her hard drive.
* The user can create personal notes as an attachment to each page with
an option to save and print.
* The user can highlight desired text.
* The user can locate specific words throughout reference materials
and/or literature.
* The user can skim through pages or go directly to a specific page.
* The user can print whole or part of desired text with or without
personal notes.
* The user can magnify (zoom in) text for easier reading.
With these advantages, Bookdigital plans to become the premier Internet
provider of reference books and materials by providing the most multi-lingual
books, and the easiest to use web site. We have thousands of books now, and
plan to acquire at least ninety thousand more over the next year. Many of
these books are of a highly technical nature. We believe that as our book
inventory grows to a critical mass, the name Bookdigital will become
synonymous with digital books, and that we will become the first Web site a
potential customer will visit in the search for reference material. As we
continue to grow, it will reach the point that Bookdigital will be the first
site looked at for any and all books that are needed instantly.
We intend to utilize these advantages to maximum advantage. The key to
successful businesses on the Internet is to become as large and efficient as
possible in an area of specialty. We believe that Bookdigital will have the
largest single library of electronic reference books and materials available.
We will seek to always maintain and improve upon that crucial advantage.
We do not intend to charge any fees for the use of our
general reference materials. Additionally, Bookdigital intends to
focus on particular reference areas such as law, seeking to become a
single source of reference materials in such area. We anticipate
having a full, functioning on-line law reference library in 2000. We will
charge a monthly subscription fee for users of the law service. We
hope to have up to date court decisions, laws and regulations, both state and
federal. We expect to compete with companies such as WestLaw and Lexis/Nexis.
Most of Bookdigital's books are public domain books that have been
formatted in a digital format. After the initial expense of converting the
books into the digital format, the costs of the books is minimal. We will
also seek arrangements with publishers to offer their newest releases for sale
in the digital format. We believe that having some new releases in the
general reading category is a reasonable way to increase traffic. Our costs
to transform the books in the digital format will be similar to our conversion
costs on public domain books, but since these new releases will be charged on
a per-book basis, the profit margin should be sufficient to make this a
profitable supplement. We do not anticipate that this will become a
significant source or revenue. We believe that the primary sources of
revenues for Bookdigital will include, but will not be limited to:
1. Advertising on our Web site;
2. Lawxpressusa.com subscription fees ;
3. Alliance with other Internet companies such as computer manufacturers,
monitor manufacturers, and modem vendors;
4. Acquisition of complimentary technologies or operating entities to expand
our business.
Advertising. The rapidly increasing number of web users, both in the
United States and Internationally, have resulted in the emergence of the web
as a new mass medium for advertising. The web is a attractive medium for
advertising because of its interactivity, flexibility, targetability, and
measurability. Advertisers can reach broad audiences and target
advertisements to users with similar demographic characteristics specific
regional population or selected individuals. We intend to solicit advertisers
to advertise on our web site. Currently, we have agreements with over eighty
advertisers such as Sharper Image, 1-800 Flowers, Mothernature.com, GOTO.Com,
and Barnesandnoble.com.
These advertisers have agreed to place banner ads on our Web site, and
will give us a portion of any sales generated by such ads. We expect these
fees to comprise a significant portion of Bookdigital's revenues.
Subscriptions. We intend to charge subscribers for certain of
our services. While Bookdigital will
not charge fees for use of
Bookdigital's reference e-library, which will permit a user to access
Bookdigital's entire e-library, Bookdigital will charge subscription fees
for certain super sub categories such as law . Subscribers
interested in accessing material and information contained on our law
site, www.lawxpressusa.com will be subject to a monthly fee. We
expect to attract lawyers, doctor and other medical professionals, engineers
and students to our Web sites.
Internet Market and Business Opportunities
According to emarketer, the typical Internet user is an
educational, professional or computer-related individual. The median age is
38, median household income is $58,000 and 58% have graduated college.
Obviously, this is a very attractive audience for advertisers. Further
emarketer statistics show that the top uses for personnel
accessing the Internet are to gather information (87.8%), E-mail (83.2%) and
to conduct research (80.5%). We have found based upon our surveys that the
people who utilize the Internet for research are in the upper echelon of the
income and educational stratum of Internet users. Furthermore, we will be
able to offer the advertisers prescreened viewers based upon their indicated
interests. These factors should allow Bookdigital to charge higher
advertising rates.
Getting customers to download needed information from the Internet is
not a hurdle for business. According to a new study from International Data
Corp., over 50% of online business people download information from the
Internet several times a week. Approximately 91% of commercial survey
respondents and 81% of consumers use their hard drives for primary storage.
We believe that expanding the capabilities on Bookdigital's Web site to
other languages will give us a significant edge. According to a study
recently released by Global Reach, the fastest- growing group of people online
today doesn't access the Internet in English. Over the last four years, the
number of non-English speaking users has grown from less than 10% to nearly
50% according to Bill Dunlap, author of the Global Reach study. In 1995, only
4 to 5 million out of a total of 40 million users were not English speakers.
Today, approximately 80 to 81 million out of 180-182 million Internet users
are non-English speakers.
The eMarketer eGeography Report (released in April 1999) reports there
are 47 million Internet users residing outside the US and another 48 million
inside the US, for a world total of 95.4 million. These figures are based on
counting only "active" net users, defined as those that get online at least
once a week and for a period of at least one to two hours per week.
According to the Dunlap survey, about 100 million of the Internet's 180
million subscribers still speak English, but Spanish and Japanese usage have
each risen to 14.2 million users. We believe that as more people access the
Internet in languages other than English, businesses marketing on the Web need
to expand to accommodate such users. Bookdigital believes that it is
important for web sites which need international exposure to known how many
people are in each language group, since a company can analyze its current
sales activity there and decide where to invest in promoting their web site.
Today, business professionals are twice as likely to use the Internet to
find sources for products and technologies as they were a year ago. This
rising importance of the Internet as a business-to-business buying tool was
highlighted by a survey released from Cahners Business Information, a trade
magazine publisher. According to the survey:
12% of business professionals who buy or set specifications for
purchase in their companies look first to web sites for
information. This compares with just 5% a year ago.
15% now turn to broad-based Internet search engines, versus 8% a
year ago.
Worldwide, eStats projects that the number of Internet users will nearly
quadruple over the next five years, from 36.0 million in 1997 to 142.0 million
by the year 2002. This represents an average annual growth rate of 79%.
Competition
There are competing sites on the Internet that offer copyrighted books
for sale and other sites that offer public domain books for free. The sites
offering copyrighted sites are well known such as Amazon.com and
Barnesandnoble.com. We will offer some copyrighted books, but our main focus
is in gathering all available quality reference material under one site. Most
of this reference material is not copyrighted.
Most web sites offering reference materials are located on web sites
organized by academic institutions. The sites that currently offer public
domain books offer them in an ASCII format and are non-profit organizations,
typically subsets of universities. Generally, these sites are difficult to
locate, and difficult to access.
Sites offering on-line law reference material are WestLaw and
Lexis/Nexis. While we expect to compete with Westlaw and Lexis, we are aware
that these services are much more well established, better
known and better funded than we are. We could also face competition in the
future from web directories, search engine, content sites, commercial online
service providers, sites maintained by Internet services providers,
traditional media companies and other entities that attempt to or establish
web sites similar to Bookdigital. There can be no assurance that our
competitors and potential competitors will not develop sites that are equal or
superior to us or that achieve greater market acceptance.
Nearly all of our existing and potential competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources that
Bookdigital. Such competitors are able to undertake more extensive marketing
campaigns for their brands and services, and make more attractive offers to
potential employees, and potential advertisers. There can be no assurance
that we will be able to compete successfully against our current or future
competitors or that competition will not have a material adverse effect on our
business, results of operations and financial condition.
Marketing Promotion and Advertising
It is our intention that the advertising, promotion and public relations
for Bookdigital and its products will be overseen by designated public
relations and advertising firms. Marketing of both Web site names
will be aggressively pursued. We will use all mediums available for
advertising. We realize that name recognition is extremely important to the
future success of our company.
The development of advertising revenue from the placement of banner ads
on the Bookdigital Web site will continue to be aggressively pursued by our
sales force. We intend to hire experienced personnel to market Bookdigital's
web site to advertisers and advertising agencies.
Bookdigital intends to utilize strategic alliances where feasible in
order to maximize revenue. For example, Bookdigital has entered into over
eighty such "alliances" with manufacturers/advertisers, such as GoTo.com,
Borders, Dell Computer, Amazon.com, Sharper Image, Staples and the Lending
Tree, so that a link to the Vendor's site appears as a banner on our site. We
receive revenue per click through or revenue per sale consummated.
Bookdigital will seek to develop and market as many additional books and
other reference material as possible, and in as many languages as possible.
Languages planned are Spanish, French, Italian, German, Chinese and Japanese.
This will serve to add many potential customers for the near future.
Operations
Bookdigital commenced operations in April 1999. Its web site,
www.bookdigital.com, has been accessible to Internet users since that time.
We have been receiving advertising revenues since August 1999. Our law site,
www.lawxpressusa.com, is currently being developed and is not yet operational.
We expect to commence operations on our law site by January 2000. We expect
to incur approximately $1,600,000 in research, development and other start up
costs to achieve operations on that site. We expect to generate revenues on
lawxpressusa.com by February 2000.
INDUSTRY BACKGROUND
E-commerce. The new arena of e-commerce provides retailers with the
opportunity to serve a rapidly growing market because consumers are
increasingly accepting the Internet as an alternative shopping channel. The
Internet is becoming an increasingly accepted method of purchasing goods among
consumers. According to Jupiter Communications, as of the end of 1998, almost
10 million U.S. households have made at least one on-line purchase and by the
end of 2002 this population is expected to grow to approximately 36.5 million,
representing nearly 60 percent of U.S. online households. We believe that
these figures will continue to grow as Internet use becomes easier and more
pleasurable through higher-speed access and less expensive and alternative
Internet access devices. The growth rate of Bookdigital customer base and
revenues may be different from the growth rate of households making online
purchases.
The Internet also provides e-commerce companies with an opportunity to
serve a global market.
Jupiter Communications' April 1999 estimates project
that the number of Internet connected households worldwide will grow from
approximately 60 million at the end of 1998 to approximately 124 million by
the end of 2002. IDC estimates that the number of Web users worldwide will
exceed 130 million by the end of 1999 and will grow to over 315 million users
by the end of 202. The growth rate of Bookdigital's international customer
base and revenues from international sales may be different from the growth
rate of Internet-connected households worldwide or the growth rate of
worldwide Web users.
Products that are well suited for e-commerce.
The reference book business is particulary well suited for e-commerce
because an online site has virtually unlimited shelf space and can offer
consumers anywhere the convenience of browsing through vast product
information databases. The use of sophisticated search engines and
personalized services enables users to locate information with convenience and
speed and to get advance notice about materials in their areas of personal
interest. Editorial content, such as synopses, excerpts, reviews and
editorial recommendations, make for a more-educated and entertaining
purchasing decision. Bookdigital believes that the presence of online stores
on consumers' desktops will, in and of itself, stimulate demand and expand the
marketplace.
Business strategy
Bookdigital seeks to become the leading online source for consumers who
need to obtain certain information and/or data.
To achieve this objective,
Bookdigital has focused its efforts on providing the highest possible levels
of value and service, which it believes are reflected in the completeness of
its product selection, the ease-of-use of its Web site, and the speed of
delivery it can offer its customers. While the principal focus of Bookdigital
will be reference information, it will continue to seek opportunities that
expand its product offering to complementary information, entertainment and
intellectual property-based products, and to present them to customers with
the highest contextual relevance. It is our goal to be recognized as the most
innovative and customer-focused of e-commerce merchants, making online
research a simple, personal and gratifying experience that results in the
highest of customer loyalty.
Central to achieving these objectives, Bookdigital's operating strategy
is focused on rapidly extending its brand and increasing its customer and
revenue base by:
Continually enhancing the user experience. Bookdigital is committed to
making every aspect of browsing, shopping and researching on its Web site an
easy and pleasurable experience. It makes continual efforts to improve the
design, layout and navigation of all elements of its Web site, as well as to
ensure that the site's performance metrics are competitive, especially with
regard to page download times and the speed of all research function.
Bookdigital also strives to make the ordering and processing easy, intuitive,
fast and secure.
Offering a large product selection and fast delivery. Bookdigital
intends to offer the largest selection of on-line reference materials and
organized links. This includes books on a variety of topics from astronomy to
law; engineering to medicine. We believe Bookdigital's online databases will
act as a highly searchable catalog for a wide spectrum of materials.
Expanding its products offering. Bookdigital believes that our entire
range of technologies, inclusive of its database and search engine, quick
information access and related interfaces with vendors will enable it to
position itself as a premier delivery mechanism for reference material, such
as manuals and pamphlets.
Building brand awareness and driving customer acquisition through
advertising and promotion. Bookdigital will seek to invest in building our
online brand and in communicating the benefits and convenience of using our
Web sites. We intend to deploy a variety of media, including online, radio,
television, print and outdoor advertising to rapidly grow our customer base.
In all our advertising and promotion initiatives, Bookdigital will seek to
continuously drive down the costs of acquiring new customers, as well as to
get visitors to return to our site more frequently and to increase the use or
our offered services and advertisers.
Strengthening and expanding strategic alliances. Bookdigital will
continue to seek out additional entities to operate as third-party web sites
with whom it hopes to develop ability to generate alliances with merchandising
support, strengthening our ability to generate sales, and to promote both
Bookdigital.com and Lawxpressusa.com's brands.
Marketing and promotion. Since inception, Bookdigital has pursued
strategic alliances with premier online companies and high traffic web sites
in order to drive traffic to its web site. We have entered into agreements
with complimentary companies such as computer manufactures, hard drive,
monitor and other manufacturers. Generally, strategic alliance deals are
arrangements which provide for links to other web sites to be placed on
Bookdigital in order to direct traffic to those other sites, in exchange for
which Bookdigital receives a commission or percent of ensuing sales.
Bookdigital will also use the unique characteristic of the Web to cost-
effectively market our products and services and to develop a sizable
membership base. Key elements to our approach are:
Development of a detailed subscriber database
Customer convenience
Expand the Bookdigital library
Develop selected subject areas, such as law and medicine, so
Bookdigital can become a comprehensive specialized research source
Continue to refine electronic book technology
Segment our site uses so we can offer highly targeted audiences to
advertisers
Sign agreements with publishers that allow for the publishing of
their latest books in digital format on our web site
Incorporate books and reference materials in various languages
Our objective is to develop a sizable membership base and to create a
one-stop digital reference source. To achieve this goal, we will:
Focus on membership growth
Build strong brand recognition
Promote repeat usage and member loyalty
Offer new products and services
Maintain and improve technological focus and expertise
Employees
As of August 31, 1999 , Bookdigital had eight full time
employees and four part time employees/consultants. Our future
success will depend, in part, on our ability to continue to attract, retain
and motivate highly qualified technical and management personnel, for whom
competition is intense. From time to time, we also employ independent
contractors to support our research and development, marketing, sales and
support and administrative organization. Our employees are not covered by any
collective bargaining agreement, and we have never experienced a work
stoppage. We believe that our relations with our employees are good.
Facilities
Our headquarters are currently located in New York City, consisting of
approximately 1,890 square feet of office space which is under a lease that
expires in 2007. The cost per annum of this lease is $26,932.50, with
annual increases.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of Bookdigital and
their respective ages as of June 30, 1999, are as follows:
NAME AGE POSITION
Don L. Rose 42 CEO, Director
Zahra S. Yamani 29 President, Director
Susan L. Schuler 53 Secretary, Director
David Blechman 48 Director
Irwin Bosh Stack 71 Director
Don L. Rose has been Chief Executive Officer and a director of Bookdigital
since June 1999. From June 1994 to June 1999, Mr. Rose served as founder and
President of American Equity Financing, Inc., a full service venture capital
firm that worked with companies to assist them in all areas of growth.
America Equity Financing, Inc. was founded on January 27, 1997.
American Equity Financing owns 1,800,000 shares of restricted common stock in
Bookdigital. Mr. Rose served as a consultant to First Madison Securities in
their investment banking area from February of 1999 to June of 1999. Mr. Rose
has extensive experience in the areas of acquisitions, start-up of public and
private companies, growth financing, investor relations, engineering, project
control and general business consulting. consulting firm of which he is
principal. His previous roles prior to founding American Equity Financing
included licensed stock broker, investment banker, founder and President of a
very successful business consulting firm that conducted management efficiency
audits, coordinated computing and engineering projects, setup enterprise wide
databases and other functions as needed by the clients. Mr. Rose is an eight
year veteran of the U.S. Navy and holds a B.S. in Computer Science from Union
College of New York. He expects to devote over 40 hours per week to
Bookdigital.
Zahra S. Yamani has been President and a director of Bookdigital since its
inception. Ms. Yamani has experience in research and development in the areas
of physics and computation technology. She is currently completing her Ph.D.
in research on high temperature super conductivity from the University of
Toronto. Ms. Yamani has been a research assistant in the physics department of
the University of Toronto since 1998. From 1992 to 1998 Ms. Yamani was a
teaching assistant in the physics department of Sharif University of
Technology in Iran. She expects to devote approximately 10 hours per week to
Bookdigital.
Susan L. Schuler has been Secretary and a director of the Company since
Bookdigital's inception in March 1999. Since June 1983, Ms. Schuler has owned
Kennedy & Kennedy, a consulting firm. Ms. Schuler has served as controller
and chief financial officer of Nesbit Systems, Inc., a software developer
since 1986. She has been controller of Singer Frumento, L.L.P., a law firm,
since September 1996. She is the owner and President of Blue Sky Services
Corp. A consulting company specializing in security regulation. She is also
the President of Auric Investment Group, Ltd., a precious metals dealer
specializing in bullion gold coins. Ms Schuler is a member of the NSCP,
National Society of Compliance Professionals. She received a B.S. from
Portland State College in 1968. She expects to devote approximately 20
hours per week to Bookdigital.
David Blechman has been a director since the company's inception. From 1992
to 1997, Mr. Blechman served as vice president of ManageMed, Inc., a medical
office management services company. Since March 1999, he has served as vice
president and chief technical officer of PriMed Technologies. He has
extensive experience in management consulting as well as the development of
various computer software models for businesses as diverse as wholesalers,
doctors, laboratories, casinos, and option traders. He also has designed and
implemented comprehensive document management systems for the medical field.
Mr. Blechman was involved in the introduction of voice to text technology for
computers and holds a MS in Management Sciences from Lehigh University in
Pennsylvania.
Irwin Bosh Stack has been a director of Bookdigital since July 1999. From
1993 to 1996, he served as chairman of Oaktree Medical Systems, a publicly
traded company, which owed and operated medical clinics. Since 19996, he has
been president of Stack Associate, Inc., independent marketing consultants.
Executive compensation
Directors' compensation
Directors will be reimbursed for the expenses they actually incur in
attending board meetings. Directors will not be paid a fee for their service
or attendance at board meetings. To date, directors have received no
compensation.
Executive officers' compensation
Bookdigital was incorporated in March 1999. Don L. Rose, our Chief
Executive Officer, shall receive an annual salary of $85,000, Zahra Yamani,
our president, shall receive a salary of $75,000 per year, and Susan L.
Schueler, our secretary, shall receive a salary of $40,000 per year.
Principal stockholders
The following table sets forth certain information known to Bookdigital
with respect to beneficial ownership of Bookdigital's common stock as of June
30, 1999, and as adjusted for the sale of the securities offered by this
prospectus, the number and percentage of outstanding shares of common stock
beneficially owned by each person who beneficially owns:
more than 5% of the outstanding shares of our common stock;
each of our officers and directors; and
all of our officers and directors as a group.
Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common stock owned by them.
Number of
Name and Address Of Shares %Beneficially Owned %Beneficially
Owned
Beneficial Owner Beneficially Owned Before Offering(3) After Offering (3)
Zahra S. Yamani(1)
321 Floor St. West
Toronto, Ontario
M55155, Canada 2,848,000 55.03.4% 44.7%
American Equity
Financing, Inc.(2)
1078 Route 112
Suite 183
Pt. Jefferson, NY 1,800,000 34.8% 28.2%
Irwin Bosh Stack
16504 Sonehaven Rd.
Miami Lakes, FL 0 0% 0 %
David Blechman
350 NW 12th Avenue
Deerfield Beach, FL 25,000 4.8% 3.9%
Susan L. Schuler
8 Elmwynd Drive
Allentown, NJ 20,000 3.9% 3.10%
All Officers and
Directors as a
Group
(5 persons) 4,693,000 90.7% 73.6%
(1) Zahra S. Yamani, President of Bookdigital, is the sole officer and
director of Knightsbridge Capital, Inc., as well as its controlling
shareholder. 2,028,000 of Ms. Yamani's 2,038,000 shares are held by
Knightsbridge.
(2) Don L. Rose, our Chief Executive Officer, is a controlling shareholder of
American Equity Financing, Inc.
(3) Excludes all shares issuable upon exercise of 370,800 outstanding
warrants.
DESCRIPTION OF SECURITIES
As of the date of this prospectus, our authorized capital stock consists
of 20,000,000 shares of common stock and 0 shares of preferred stock.
Units
Each unit consists of one share of common stock and one warrant.
Common Stock
As of May 31, 1999, there were 5,175,200 shares of common stock
outstanding held of record by approximately 100 shareholders. Excluding the
exercise of outstanding warrants, there will be 6,375,200 shares of common
stock outstanding after giving effect to the sale of the 1,200,000 we are
offering.
Holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders.
Subject to preferences that may be applicable to the holders of
outstanding shares of preferred stock, the holders of common stock are
entitled to receive such lawful dividends as the board of directors may
declare from time to time. In the event we liquidate, dissolve or wind up,
and subject to the rights of the holders of outstanding shares of preferred
stock, the holders of shares of common stock will be entitled to receive pro
rata all of our remaining assets available for distribution to our
shareholders. There are no redemption or sinking fund provisions applicable
to the common stock. All outstanding shares of common stock are fully paid and
nonassessable, and shares of common stock to be issued pursuant to this
offering will be, upon issuance, fully paid and nonassessable.
Warrants
As of May 31, 1999, there were 370,800 warrants issued and outstanding.
Each warrant entitles the holder to purchase one share of common stock at an
exercise price of (120%) of the initial public offering price of the common
stock. The shares of common stock underlying the warrants, when issued upon
exercise of a warrant, will be fully paid and non-assessable. The warrants are
exercisable for a two year period commencing March 30, 1999, after which they
will expire. The warrants are subject to redemption by Bookdigital at a price
of $.10 per warrant at any time on twenty days prior written notice, provided
the closing bid price of the common stock is at least 120% of the warrant
exercise price ($ ) for twenty consecutive trading days ending three
days prior to the date that notice of redemption was given to warrant holders.
A warrant may be exercised upon surrender of the warrant certificate on
or before the expiration or redemption date of the warrant at the offices of
the warrant agent, with the form of "Election to Purchase" on the reverse side
of the warrant certificate completed and executed as indicated, accompanied by
payment of the exercise price (by certified or bank check payable to the order
of Bookdigital.com, Inc.) for the number of shares with respect to which the
warrant is being exercised. We will not be required to honor the exercise of
the warrants if, in the opinion of our board of directors with the advice of
counsel, the sale of securities upon exercise would be unlawful.
The foregoing discussion of material terms and provision of the warrants
is qualified in its entirety be reference to the detailed provisions of the
warrant agreement, the form of which has been filed as an exhibit to the
registration statement of which this prospectus is a part.
For the life of the warrants, the holders have the opportunity to profit
from a rise in the market price of the common stock without assuming the risk
of ownership of the share of common stock underlying the warrants. The
warrant holders may be expected to exercise their warrants at a time when we
would, in all likelihood, be able to obtain any needed capital by an offering
of common stock on terms more favorable than those provided for by the
warrants. Furthermore, the terms on which we could obtain additional capital
during the life of the warrants may be adversely affected.
Transfer Agent and Warrant Agent
Continental Stock Transfer, New York, New York, will serve as the
Transfer Agent for the common stock and Warrant Agent for the warrants.
Determination of Offering Price
The offering price of the common stock will be arbitrarily determined by
Bookdigital and the underwriters. This price bears no relation to our assets,
book value, or any other customary investment criteria, including our prior
operating history. Among factors we considered in determining the offering
price were estimates of Bookdigital's business potential, our financial
resources, the amount of equity and control desired to be retained by the
present shareholders, the amount of dilution to public investors and the
general condition of the securities markets.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no market for Bookdigital's
securities. Future sales of substantial amounts of common stock or warrants
in the public market could adversely affect market prices prevailing from time
to time.
Upon completion of this offering, Bookdigital will have outstanding an
aggregate of 6,375,200 shares of common stock, assuming no exercise of any
warrants to purchase common stock. 1,200,000 < of these shares will
be freely tradable without restriction or further registration under the
Securities Act (except for any shares purchased by "affiliates," as that term
defined in Rule 144 under the Securities Act). The remaining
5,175,000
shares are shares of restricted stock, as that term is defined in Rule
144 promulgated under the Securities Act. Restricted stock may be sold in
public market only if registered or if it qualifies for an exemption from
registration is available.
Pursuant to the provisions of Rule 144 (including Rule 144(k)), the
shares of restricted stock would be available for sale in the public market as
follows: 5,175,000 restricted shares would be eligible for sale under
Rule 144 upon expiration of the one year holding period applicable to
restricted stock, which expires on various dates between March 1999 and May
1999.
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year
(including the holding period of any prior owner except an affiliate) would be
entitled to sell within any three-month period a number of shares that does
not exceed the greater of: (i) one percent of the number of share of common
stock then outstanding (which will equal approximately 63,752 shares
immediately after this offering); or (ii) the average weekly trading volume of
the common stock during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about Bookdigital. Under Rule
144(k), a person who is not deemed to have been an Affiliate of Bookdigital at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner except for an affiliate), is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144; therefore, unless otherwise
restricted, "144(k) shares" may be sold immediately upon the completion of
this offering.
UNDERWRITING
The underwriters named below, for whom First Madison Securities, Inc. is
acting as representative, have severally agreed pursuant to the terms and
conditions of the underwriting agreement between Bookdigital and the several
underwriters, to purchase from Bookdigital and Bookdigital has agreed to sell
to the underwriters the number of shares of common stock set forth in the
table below at the price set forth on the cover page of this prospectus.
Number of
Underwriter Shares
First Madison Securities, Inc
Janssen-Meyers, L.P.
Westphalia Investments, Inc.
Total................................................ 1,200,000
===========
The underwriting agreement provides that the obligations of the
underwriters to purchase such shares of common stock are subject to certain
conditions. The Underwriters are selling the shares on a firm commitments
basis.
The representative has advised Bookdigital that the underwriters propose
to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this prospectus and to selected
dealers at such price less a concession within the discretion of the
representative, and that the underwriters and such dealers may reallow a
concession to other dealers, including the underwriters, within the discretion
of the representative. After the public offering price, the concessions to
selected dealers and the reallowance to other dealers may be changed by the
representative.
The representative may also impose a penalty bid on certain underwriters
and selling group members. This means that if the representative purchases
securities in the open market to reduce the underwriters' short position or to
stabilize the price of the common stock and/or warrants, they may reclaim the
amount of the selling concession from the underwriters and selling group
members who sold those securities as part of this offering.
The underwriting agreement provides for indemnification between
Bookdigital and the underwriters against certain liabilities, including
liabilities under the Securities Act and for contribution by Bookdigital and
the underwriters to payments that may be required to be made in respect
thereof. Insofar as indemnification for liabilities under the Securities Act
may be permitted to Bookdigital directors, officers, and controlling persons
of Bookdigital pursuant to the agreement between Bookdigital and the
underwriters, or otherwise, Bookdigital has been advised that in the opinion
of the Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
Bookdigital has agreed to pay the representative a nonaccountable
expense allowance equal to three percent of the gross proceeds from the sale
of common stock offered hereby. In the event the offering is not consummated,
any nonaccountable portion of the advanced payment will be promptly returned
to Bookdigital.
Bookdigital has agreed to issue to the underwriters the underwriter's
warrants, which entitle the holders to purchase up to an aggregate of 120,000
shares of common stock (one share for every ten shares sold by the
underwriters) for $.001 per warrant. These warrants will have an exercise
price per share equal to 120 % of the initial offering price of the common
stock in this offering . The underwriter's warrants are not transferable
for one year from the date of issuance, except to individuals who are either a
partner or an officer of an underwriter, by will or by the laws of descent and
distribution. The underwriter's warrants are not redeemable by Bookdigital.
Bookdigital has agreed to maintain an effective registration statement with
respect to the issuance of the securities underlying the underwriter's
warrants, if necessary, to allow their public resale without restriction, at
all times during the period in which the underwriter's warrants are
exercisable, commencing one year after the date of this prospectus. Such
securities are being registered on the registration statement
of which this Prospectus is a part.
Prior to this offering, there has been no public market for
Bookdigital's securities. Accordingly, the initial public offering price of
the common stock has been determined in negotiations between Bookdigital and
the representative. Among the factors considered in determining the initial
public offering price of the common stock were the history and the prospects
of Bookdigital and the industry in which it operates, the status and
development prospects for Bookdigital's proposed products and services, the
experience and qualifications of Bookdigital's executive officers and the
general condition of the securities markets at the time of the offering.
Legal Matters
The validity of the securities offered hereby will be passed upon for
Bookdigital by its counsel, Schonfeld & Weinstein, L.L.P., New York, New York.
Certain matter in connection with the offering will be passed upon for the
underwriters by Frank Hariton, Esq., White Plains, New York
Experts
The balance sheet as of May 31, 1999, and the statements of operations,
stockholders' deficit, and cash flows for each of the two months then ended,
have been audited by Simon Krowitz Bolin & Associates, independent certified
public accountants, as set forth in their report thereon appearing elsewhere
herein and in registration statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
CERTAIN TRANSACTIONS
On March 25, 1999, Bookdigital issued a total of 4,708,040 shares to 7
people for par value. Zahra Yamani, President of Bookdigital, was issued
810,000 of those shares. Knightsbridge Capital, Inc., a company of which Ms.
Yamani is a principal, was issued 2,028,000 of those shares. Additionally,
1,800,000 of the 4,708,040 shares were issued to American Equity Financing,
Inc., a company of which Don L. Rose, Chief Executive Officer of Bookdigital,
is a principal. Susan L. Schuler, Secretary of Bookdigital, purchased 20,000
shares, and David Blechman, a director, purchased 25,000 shares. Zarto
Ltd. purchased 25,000 shares and Janis Fidotta purchased 20,000 shares.
Additional Information
Bookdigital has filed with the Commission a Registration Statement on
Form SB-2 under the Securities Act of 1933, as amended with respect to the
Common stock offered hereby as well as common stocks and warrants held by
selling shareholders. This prospectus omits certain information contained in
the registration statement and the exhibits thereto, as permitted y the rules
and regulations of the Commission. For further information with respect to
the Company and the securities, reference is hereby made to the Registration
Statement and such exhibits filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street , N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 75 Park Place, 14th Floor,
New York, NY 10007. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
upon payment of the prescribed fees. The SEC maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC, including the
Registration Statement. The address of the SEC"s World Wide Web site is
http://www.sec.gov.
Statements contained in this prospectus as to the contents of any
contract or other documents referred to herein are not necessarily complete
and. In each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement, each such
statement being qualified in all respect by such reference.
We are not currently a reporting company under the Securities and Exchange
Act of 1934, and therefore we have not filed any reports with the Securities
and Exchange Commission. Upon completion of this offering we intend to
register under the Securities Act, and will be requires to furnish to
our security holders annual reports containing audited reports containing
audited financial statements reported on by independent auditors, and
quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year by electronic delivery on our Web site at
www.Bookdigital.Com.
BOOKDIGITAL.COM, INC.
Table of contents
Independent Auditors Report
Financial Statements
August 31, 1999
Balance Sheet
Statement of Income and Retained Earnings
Statement of Change in Stockholder's Equity
Statement of Cash Flows
Notes to Financial Statements
Independent Accountants' Report
To the Board of Directors of
Bookdigital.com, Inc.
New York, New York
We have compiled the accompanying balance sheet of Bookdigital.com, Inc. as of
August 31, 1999 and the related statements of changes in stockholders' equity,
operations and retained earnings and cash flows for the three months then
ended and for the period March 25, 1999 (inception) to August 31, 1999, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and supplementary information,
and, accordingly, do not express an opinion or any other form of assurance on
them.
Rockville, Maryland
September 18, 1999
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
BALANCE SHEET
August 31, 1999
ASSETS
Current Assets
Cash $ 109,092
Account Receivable 5,500
Investment Securities 322,123
Total Current Assets 436,715
Property and Equipment
Furniture and Fixtures 11,507
Equipment 8,770
Computer Equipment 15,800
Accumulated Depreciation - Computer Equipment (790)
Total Property and Equipment 35,287
Other Assets
Security Deposits 28,821
Organization Costs (net of amortized of
$109,889) 1,538,439
Total Other Assets 1,567,260
TOTAL ASSETS $ 2,039,262
LIABILITY AND STOCKHOLDERS' EQUITY
Current Liability $ 0
Stockholders' Equity
Common Stock - $.001 Par Value;
20,000,000 Shares
Authorized, 5,174,200 Shares Issued and
Outstanding 5,174
Paid-in Capital 2,456,435
Retained (Deficit), including deficit
accumulated during the
development stage
(422,347)
Total Stockholders' Equity 2,039,262
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 2,039,262
See Accountants' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Periods
June 1, 1999 March 25
to August 31, (inception)to
1999 August 31, 1999
INCOME
Interest Income $ 1,982 $ 2,798
Realized Gain or (Loss) on Investments (64,135) 5,327
Unrealized Gain or Loss on Investments 3,943 3,943
TOTAL INCOME (LOSS) (58,210) 12,068
EXPENSES
Officer's Salaries 38,071 38,071
Clerical Salaries 558 558
Consulting Fees 64,228 76,228
Entertainment 0 2,200
Internet 179 309
Insurance 2,662 2,662
Office Expenses 5,543 8,732
Postage 108 993
Professional Fee - Public Relations 6,000 6,000
Professional Fee - Accounting 10,000 11,500
Professional Fee - Legal 22,000 30,500
Professional Fee - Other 31,480 39,730
Dues and Subscriptions 498 498
Software Expense 3,064 3,064
Rent 6,088 13,288
Retainer Fee 10,000 50,000
Amortization - Organization Cost 82,417 109,889
Stock/Registration Fees 1,848 1,848
Advertising - Internet 24,500 24,500
Depreciation Expense -
Computer Equipment 790 790
Payroll Tax Expense 4,051 4,051
Other Taxes 100 100
Telephone Expenses 3,516 8,016
TOTAL EXPENSES 317,701 433,527
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Periods
June 1, 1999 March 25
To August 31, (inception)to
1999 August 31, 1999
OTHER INCOME (EXPENSE)
Interest $ (528) $ (888)
NET (DEFICIT) (376,439) (422,347)
RETAINED (DEFICIT) - Beginni (45,908) 0
RETAINED (DEFICIT) - Ending $ (422,347) $ (422,347)
NET DEFICIT PER SHARE - BASIC $ (0.073) $ (0.082)
NET DEFICIT PER SHARE - DILUTED $ (0.073) $ (0.082)
SHARES USED IN PER SHARE CALCULATION - BASIC 5,174,200 5,174,200
SHARES USED IN PER SHARE CALCULATION - DILUTED 5,174,200 5,174,200
See Accountants' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGE IN STOCKHOLDERS' EQUITY
For the Period from June 1, 1999 to August 31, 1999
Compre-
Retained hensive
Shares Amount Earnings Total Income
Balance at March 25,
1999 0 $ 0 $ 0 $ 0 $ 0
Issuance of
Common Stock 5,175,200 5,175 5,175
Paid in Capita 2,461,934 2,461,934
Loss to May 31, 1999 (45,908) (45,908) (45,908)
Balance at May 31,
1999 5,175,200 2,467,109 (45,908) 2,421,201 (45,908)
Refund to the
Investor (1,000) (1) (1)
Reduction of
Paid-in Capital (5,499) (5,499)
Net Loss (376,439) (376,439) (376,439)
Balance at August
31, 1999 5,174,200 $5,461,609 $(422,347) $2,039,762 $(422,347)
See Accountants' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Periods
June 1, 1999 March 25 to
To August 31, (inception) to
1999 August 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Deficit) $ (376,439) $ (422,347)
Adjustment to Reconcile Net (Deficit)
to Net Cash Used by Operating Activities
Depreciation Expense -
Furniture and Fixtures 790 790
Amortization Expense -
Organizational Cost 82,417 109,889
Increase in Accounts Receivable (5,500) (5,500)
Security Deposit (28,821) (28,821)
NET CASH (USED) BY OPERATING ACTIVITIES (327,553) (345,989)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales (Purchases) of Marketable
Equity Securities 656,355 (322,124)
Purchases of Furniture and Fixtures (11,507) (11,507)
Purchases of Computer Equipment (8,770) (24,570)
Capital Expenditures -
Organization Costs 0 (123,428)
NET CASH PROVIDED BY INVESTING ACTIVITIES 636,078 (481,629)
CASH FLOWS FROM BY FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 0 942,210
Increase (Decrease) in Short-term Debt (322,561) 0
Decrease in Common Stock (1) (1)
Decrease in Paid-in Capital (5,499) (5,499)
NET CASH USED BY FINANCING ACTIVITIES (328,061) 936,710
NET INCREASE (DECREASE) IN CASH (19,536) 109,092
CASH - Beginning 128,628 0
CASH - Ending $ 109,092 $ 109,092
Supplemental Disclosure:
Interest Paid for the Period
from June 1, 1999 to August 31, 1999 $ 528 $ 888
NONCASH INVESTING ACTIVITIES:
Capital Expenditures -
Organization Costs $ 0 $ 1,524,900
See Accountants' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
August 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Business Activity - Bookdigital.com, Inc. (the Company) is a
development stage company. The Company was incorporated in the Delaware on
March 25, 1999 and has a December 31 year end. The Company's mission is to
become the ultimate reference library site online. The company's site
(www.Bookdigital.com) on the Internet is designed to maintain a very
comprehensive set of books, manuals, pamphlets, journals, research data, and
links. Bookdigital.com serves as a home base library for educational and
intellectual advancement. Viewer may search, review, browse and download
information needed in any subject such as physics, law, astronomy, etc. at
Bookdigital.com site.
The search can be made by title, subject or author for any reference
materials. Currently all reference materials are in English. However, the
Company intends to develop a global reference site in Spanish, French, German,
Italian, etc. The Company intends to register its viewers and may charge a
subscription fee in the future.
Cash and Cash Equivalents - Bookdigital.com, Inc. maintains a bank account and
a petty cash fund, both of which it classifies as cash for purposes of the
statement of cash flows.
Marketable Equity Securities - The companies' marketable securities consist of
equity securities that have a readily determinable fair market value.
Management determines the appropriate classification of its investments at the
time of purchase and re-evaluates such determinations at each balance sheet
date.
Property, Plant and Equipment - Fixed assets are recorded at cost. The costs
are being depreciated on a straight-line basis over a five-year period.
Organization Costs - The Company incurred organization costs of $1,648,328.
These costs are being amortized on a straight-line basis over a five-year
period.
Common Stock - Common stock issued by the company as payment for services has
been valued by management at the estimated fair market value of the stock
existing at the time of its issuance.
Basic and Diluted Net Income (Loss) per Share - Basic net income (loss) per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is also
computed using the weighted average number of common shares outstanding during
the period, including conversion of any warrants to its equivalent common
stock.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
August 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.
Concentration of Risk - The Company maintains an operating checking account at
an FDIC insured (to $100,000) financial institution. The amount in this
account in excess of the insured limit was $9,092. The Company also maintains
a money market account with the brokerage firm of Spear, Leeds & Kellogg.
These funds are not FDIC insured. The total amount not FDIC insured amounts
to $331,215.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the use of the "liability method" of accounting for
income taxes. Accordingly, deferred tax liabilities and asset are determined
based upon the differences between the financial statement and tax bases of
assets and liabilities, using enacted rates in effect for the year in which
the differences are expected to reverse. Current income taxes are based upon
the year's taxable income for federal and state income tax reporting purposes.
NOTE 2 - STOCKHOLDERS' EQUITY
Common Stock - The Company is authorized to issue 20,000,000 common shares,
$0.001 par value per share and 5,175,200 shares of common stock were issued
and outstanding. The holders of common stock have one vote per share on all
matters (including election of directors) without provision for cumulative
voting. Thus, holders of more than 50% of the shares voting for the election
of director can elect all of the directors, if they choose to do so. The
common stock is not redeemable and has no conversion or pre-emptive rights.
There are no sinking fund provisions. In the event of liquidation of the
company, the holders of common stock will share equally in any balance of the
company's assets available for distribution to them after satisfaction of
creditors and preferred stockholders, if any.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
August 31, 1999
NOTE 2 - STOCKHOLDERS' EQUITY (Continued)
Warrants - Each Class A warrant entitles the holder to purchase one share of
common stock at an exercise price of 120% of the initial public offering price
(the "Exercise Price") during the two-year period commencing March 30, 1999
("Exercise Period"). The Class A warrants are subject to redemption by the
company at a price of $0.10 per warrant, at any time on twenty-day prior
written notice provided the closing bid price of the common stock is at least
120% of the exercise price for twenty consecutive trading days ending three
days prior to the date that notice of redemption was give to warrant holders.
The shares and Class A warrants shall be detachable and separately tradable as
determined by the company. These warrants will have a one-year holding
period. They may be exercised any time after this one-year period, up to the
expiration period of two years.
NOTE 3 - LOAN PAYABLE
The Company maintains an overdraft account with Spear, Leeds & Kellogg, its
brokerage house. The loan is due on demand and bears an interest rate of 6.5%
to 7.5%. The loan is secured by the company's investment securities.
Interest is payable monthly.
NOTE 4 - INCOME TAXES
Since the Company has not yet realized income as of the date of this report,
no provision for income taxes has been made. At August 31, 1999 a deferred
tax asset has not been recorded due to the company's lack of operations to
provide income to use the net operation loss carryover of $(422,347) which
expires in 2019.
NOTE 5 - CONTINGENCIES
The Company is not currently aware of any other legal proceedings or claims
that the company believes will have, individually or in the aggregate, a
material adverse effect on the company's financial position or results of
operations.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
August 31, 1999
NOTE 6 - SUBSEQUENT EVENT - COMMITMENT
In September, 1999, the Company entered into a lease for office space. The
term of the lease is from October 1, 1999 to December 31, 2007. The lease has
annual increases of 3%. Minimum annual rentals for the year ending August 31
are:
2000 $ 23,940
2001 45,990
2002 50,400
2003 52,290
2004 54,180
$ 226,800
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
Financial Statements
May 31, 1999
BOOKDIGITAL.COM, INC.
Table of Contents
Independent Auditors' Report
Financial Statements
Balance Sheet
Statement of Income and Retained Earnings
Statement of Change in Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
Independent Auditors' Report
To the Board of Directors of
Bookdigital.com, Inc.
New York, New York
We have audited the accompanying balance sheet of Bookdigital.com, Inc. as of
May 31, 1999 and the related statements of income and retained earnings and
cash flows for the period from inception (March 25, 1999) to May 31, 1999.
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 audit.
We conducted our audit 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 audit provides 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 Bookdigital.com, Inc. as of
May 31, 1999 and the results of its operations and its cash flows for the
initial period then ended in conformity with generally accepted accounting
principles.
Rockville, Maryland
June 23, 1999
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
BALANCE SHEET
May 31, 1999
ASSETS
Current Assets
Cash $ 128,629
Investment Securitie 978,478
Total Current Assets 1,107,107
Property and Equipment
Computer Equipment 15,800
Other Assets
Organization Costs
(net of amortized of $27,472) 1,620,856
TOTAL ASSE $ 2,743,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Liability Payable - margin account $ 322,562
Stockholders' Equity
Common Stock - 0.001 Par Value;
20,000,000 Shares
Authorized, 5,175,200 Shares Issued and
Outstanding 5,175
Paid-in Capital 2,461,934
Retained Earnings, including
Deficit Accumulated During the
Development Stage (45,908)
Total Stockholders' Equity 2,421,201
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,743,763
See Auditors' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Period March 25,1999 (date of inception) to May 31, 1999
INCOME
Interest Income $ 816
Realized Gain on Investments 69,462
TOTAL GROSS INCOME 70,278
EXPENSES
Accounting Fee 1,500
Amortization 27,472
Bank Charge 42
Consulting Fees 12,000
Entertainment 2,200
Interest Expenses 360
Internet 130
Legal Expenses 8,500
Office Expenses 3,147
Postage 885
Professional Fee - Other 8,250
Rent 7,200
Retainer Fee 40,000
Telephone Expenses 4,500
TOTAL EXPENSES 116,186
NET DEFICIT (45,908)
RETAINED EARNINGS AT
MARCH 25, 1999 (INCEPTION) 0
RETAINED EARNINGS - MAY 31, 1999 $ (45,908)
NET DEFICIT PER SHARE - BASIC $ (0.009)
NET DEFICIT PER SHARE - DILUTED $ (0.009)
SHARES USED IN PER SHARE
CALCULATION - BASIC 5,175,200
SHARES USED IN PER SHARE
CALCULATION - DILUTED 5,175,200
See Auditors' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGE IN STOCKHOLDERS' EQUITY
For the Period from March 25, 1999 (date of inception) to May 31, 1999
Shares Amount Retained Earnings Total Comprehensive
Income
Balance at
March 25,
1999 0 $ 0 0 $ 0
Issuance of
Common
Stock 5,175,200 5,175 5,175
Paid-in
Capital 2,461,934 2,461,934
Net Loss (45,908) (45,908) (45,908)
Balance at
May 31,
1990 5,175,200 $2,467,109 $(45,908) $2,421,201 $(45,908)
See Auditor's Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from March 25, 1999 (date of inception) to May 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Deficit $ (45,908)
Adjustment to Reconcile Net Deficit to
Net Cash Used by Operating
Activities
Amortization 27,472
NET CASH (USED) BY OPERATING ACTIVITIES (18,436)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Marketable Equity Securities (978,478)
Purchases of Computer Equipment (15,800)
Capital Expenditures - Organization Cost (123,428)
NET CASH USED BY INVESTING ACTIVITIES (1,117,706)
CASH FLOWS FROM BY FINANCING ACTIVITIES
Proceeds from Issuance Common Stock 942,210
Proceeds from Short-term Debt 322,560
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,264,770
NET INCREASE IN CASH 128,628
CASH - March 25, 1999 0
CASH - May 31, 1999 $ 128,628
Supplemental Disclosure:
Interest Paid During the Year $ 360
NONCASH INVESTING ACTIVITIES:
Capital Expenditures - Organization Cost $1,524,900
See Auditors' Report and Notes to Financial Statements.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
May 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Business Activity - Bookdigital.com, Inc. (the Company) is a
development stage company. The Company was incorporated in the Delaware on
March 25, 1999 and has a December 31 year end. The Company's mission is to
become the ultimate reference library site online. The company's site
(www.Bookdigital.com) on the Internet is designed to maintain a very
comprehensive set of books, manuals, pamphlets, journals, research data, and
links. Bookdigital.com serves as a home base library for educational and
intellectual advancement. Viewer may search, review, browse and download
information needed in any subject such as physics, law, astronomy, etc. at
Bookdigital.com site.
The search can be made by title, subject or author for any reference
materials. Currently all reference materials are in English. However, the
Company intends to develop a global reference site in Spanish, French, German,
Italian, etc. The Company intends to register its viewers and may charge a
subscription fee in the future.
Cash and Cash Equivalents - Bookdigital.com, Inc. maintains a bank account and
a petty cash fund, both of which it classifies as cash for purposes of the
statement of cash flows.
Marketable Equity Securities - The companies' marketable securities consist of
equity securities that have a readily determinable fair market value.
Management determines the appropriate classification of its investments at the
time of purchase and re-evaluates such determinations at each balance sheet
date.
Property, Plant and Equipment - Fixed assets are recorded at cost. The costs
are being depreciated on a straight-line basis over a five-year period.
Organization Costs - The Company incurred organization costs of $1,648,328.
These costs are being amortized on a straight-line basis over a five-year
period.
Common Stock - Common stock issued by the company as payment for services has
been valued by management at the estimated fair market value of the stock
existing at the time of its issuance.
Basic and Diluted Net Income (Loss) per Share - Basic net income (loss) per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is also
computed using the weighted average number of common shares outstanding during
the period, including conversion of any warrants to its equivalent common
stock.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
May 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.
Concentration of Credit Risk - The Company maintains a cash balance in a money
market account with Spear, Leeds & Kellogg. Accounts are insured by the FDIC
(Federal Deposit Insurance Corporation) up to $100,000.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the use of the "liability method" of accounting for
income taxes. Accordingly, deferred tax liabilities and asset are determined
based upon the differences between the financial statement and tax bases of
assets and liabilities, using enacted rates in effect for the year in which
the differences are expected to reverse. Current income taxes are based upon
the year's taxable income for federal and state income tax reporting purposes.
NOTE 2 - STOCKHOLDERS' EQUITY
Common Stock - The Company is authorized to issue 20,000,000 common shares,
$0.001 par value per share and 5,175,200 shares of common stock were issued
and outstanding. The holders of common stock have one vote per share on all
matters (including election of directors) without provision for cumulative
voting. Thus, holders of more than 50% of the shares voting for the election
of director can elect all of the directors, if they choose to do so. The
common stock is not redeemable and has no conversion or pre-emptive rights.
There are no sinking fund provisions. In the event of liquidation of the
company, the holders of common stock will share equally in any balance of the
company's assets available for distribution to them after satisfaction of
creditors and preferred stockholders, if any.
BOOKDIGITAL.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
May 31, 1999
NOTE 2 - STOCKHOLDERS' EQUITY (Continued)
Warrants - Each Class A warrant entitles the holder to purchase one share of
common stock at an exercise price of 120% of the initial public offering price
(the "Exercise Price") during the two-year period commencing March 30, 1999
("Exercise Period"). The Class A warrants are subject to redemption by the
company at a price of $0.10 per warrant, at any time on twenty-day prior
written notice provided the closing bid price of the common stock is at least
120% of the exercise price for twenty consecutive trading days ending three
days prior to the date that notice of redemption was give to warrant holders.
The shares and Class A warrants shall be detachable and separately tradable as
determined by the company. These warrants will have a one-year holding
period. They may be exercised any time after this one-year period, up to the
expiration period of two years.
NOTE 3 - LOAN PAYABLE
The Company maintains an overdraft account with Spear, Leeds & Kellogg, its
brokerage house. The loan is due on demand and bears an interest rate of 6.5%
to 7.5%. The loan is secured by the company's investment securities.
Interest is payable monthly.
NOTE 4 - INCOME TAXES
Since the Company has not yet realized income as of the date of this report,
no provision for income taxes has been made. At May 31, 1999 a deferred tax
asset has not been recorded due to the company's lack of operations to provide
income to use the net operation loss carryover of $(45,908) which expires in
2019.
NOTE 5 - CONTINGENCIES
The Company is not currently aware of any other legal proceedings or claims
that the company believes will have, individually or in the aggregate, a
material adverse effect on the company's financial position or results of
operations.
Until , all dealers that effect transaction in the securities
whether or not participating in this offering , may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotment or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Delaware General Corporation Law, as amended, provides for the
indemnification of the Company's officers, directors and corporate employees
and agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. - (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstance of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections
(a) and (b) of this section. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
section. Such expenses including attorneys' fees incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation including absorbed in a consolidation of merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation as
he would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors, and administrators of such person.
Article XI of the Company's By-laws provides for the indemnification of the
company's officers, directors, and corporate employees and agents under
certain circumstances as follows:
Article XI provides that the Company will hold harmless and will indemnify all
officers, directors, employees and agents of the Company against all expense,
liability and loss reasonably incurred or suffered by such person in its
connection as such with the Company. The Company shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by
such person (except against the Company) only if such proceeding was
authorized by the Company's Board of Directors.
If a claim under the above paragraph is not paid in full by the Company within
30 days after a written claim has been received by the Company, the claimant
may at anytime thereafter bring suit against the Company to recover the unpaid
amount of the claim. If the claimant is successful, it is entitled to be paid
the expense of prosecuting such claim, as well.
Notwithstanding any limitations in other sections of the By-laws, the Company
will, to the fullest extend permitted by Section 145 of the General
Corporation Law of Delaware, indemnify any and all persons whom it has the
power to indemnify against any and all of the expense, liabilities and loss,
and this indemnification shall not be deemed exclusive of any other rights to
which the indemnities may be entitled under any By-law, agreement, or
otherwise, both as to action in his/her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such persons.
The Company may, at its own expense, maintain insurance to protect itself and
any director, officer, employee or agent of the Company against any such
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Item 25. Expenses of Issuance and Distribution
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Escrow Fee....................................$ 1,000.00
Securities and Exchange Commission
Registration Fee.............................$ 6,776.23
Legal Fees....................................$ 25,000.00
Accounting Fees...............................$ 10,000.00
Printing and Engraving....................... $ 1,500.00
Blue Sky Qualification Fees and Expenses......$ 3,000.00
Miscellaneous.................................$ 2,000.00
Transfer Agent Fee............................$ 1,500.00
TOTAL...................................................$50,776.23
Item 26. Recent Sales of Unregistered Securities
On March 25, 1999, Bookdigital issued a total of 4,708,040 shares to 7
people for par value.
Between March 30, 1999 and May 25, 1999, Bookdigital conducted a private
placement of our securities. We offered a maximum amount of 181,800 units,
each unit consisting of one share of common stock and one warrant, exercisable
for one share of common stock at a price equal to 120% of the offering price
in Bookdigital's initial public offering. The units were offered at $5.50 per
unit. We sold 175,200 units to approximately 80 people.
On May 31, 1999, we issued 195,600 warrants and 272,000 shares of common stock
to various consultants of Bookdigital for work, labor and services performed
and to be performed in the future.
Each of these offerings was conducted pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act of 1933. The
March 30, 1999 private placement was also conducted pursuant to Rule 504 of
Regulation D.
EXHIBITS
Item 27.
1.0 Underwriting Agreement
3.1 Certificate of Incorporation.*
3.2 By-Laws.*
4.1 Specimen Certificate of Common Stock.*
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
99.0 Selected Dealer's Agreement
99.1 Lease
99.2 Affiliate Advertising Agreements
Item 28.
UNDERTAKINGS
The registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) 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 thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of managing underwriter;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be treated as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(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.
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 any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York on September 30, 1999.
BOOKDIGITAL.COM, INC.
BY:
Don L. Rose
Don L. Rose, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
Dated September 29, 1999
Don L. Rose
Don L. Rose
Chief Executive Officer, Director
Dated September 29, 1999
Zahra S. Yamani
Zahra S. Yamani
President, Director
Susan L. Schuler Dated September 29, 1999
Susan L. Schuler
Secretary, Director
Irwin Bosh Stack Dated September 29, 1999
Irwin Bosh Stack
Director
David Blechman
Director