As filed with the Securities and Exchange Commission on November 12, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(INITIAL STATEMENT)
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(Name of small business issuer in its charter)
NEVADA 7812 20-1257307
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1026 W El Norte Parkway, Suite 191, Escondido, California 92026
(Address and telephone number of principal executive offices)
1416 N. La Brea Ave., Hollywood, California 90028
(Address of principal place of business or intended principal place of business)
Incorp Services, 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
(Name, address and telephone number of agent for service)
Copies of communications to:
Richard I. Anslow, Esq.
Anslow & Jaclin, LLP
195 Route 9 South, Suite 204
Manalapan, New Jersey 07726
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
1
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ---------------------------------- ---------- --------------- -------------- ------------
Proposed Proposed
Title of each Amount to maximum maximum Amount of
class of securities be offering aggregate registration
to be registered registered price per share offering price fee
- ---------------------------------- ---------- --------------- -------------- ------------
Common shares, par value $.001 (1) 1,000,000 $5.00 $5,000,000 $633.50
- ---------------------------------- ---------- --------------- -------------- ------------
Common shares, par value $.001 (2) 950,000 $5.00 $4,750,000 $601.83
- ---------------------------------- ---------- --------------- -------------- ------------
Common shares, par value $.001 (3) 50,000 $5.00 $ 250,000 $ 31.67
(1) Represents shares being sold to the public. The price of $5.00 per
share is being estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) of the Securities Act.
(2) Represents shares of common stock issuable in connection with the
conversion of options issued to Barr Eden Family Trust (500,000
options) and Waldwick Investments Limited (450,000 options). The price
of $5.00 per share is being estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(c) of the
Securities Act.
(3) Represents shares of common stock of Andrew Banks & Associates Pty.
Ltd. The price of $5.00 per share is being estimated solely for the
purpose of calculating the registration fee pursuant to Rule 457(c) of
the Securities Act.
Our non-affiliate selling shareholders will sell at a fixed price per share
until our shares are quoted on the OTC Bulletin Board (or any other specified
market). Thereafter, such selling shareholders shall sell at prevailing market
prices or privately negotiated prices.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until this 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.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED , 2004
2
FRIDAY NIGHT ENTETAINMENT CORPORATION
1,000,000 SHARES OF COMMON STOCK
950,000 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH
CONVERSION OF OUTSTANDING OPTIONS
50,000 SHARES OF COMMON STOCK FOR A SELLING SECURITY HOLDER
Friday Night Entertainment Corporation (the "Company" "we" or "us"), a Nevada
corporation, is offering, on a "best efforts" basis 1,000,000 shares of our
common stock, par value $.001, at U.S. $5.00 per share (the "Offering"). The
initial offering period will end twelve (12) months from the date listed in this
prospectus unless it is terminated earlier (the "Initial Offering Period"). This
Offering is being made on a self-underwritten basis by us through our officers
and directors. Since there is no selling commission, all proceeds from the
Offering will go to us.
In addition, our selling security holders are offering to sell 950,000 shares
of our common stock issuable in connection with the conversion of our options,
and 50,000 shares of common stock.
Currently, we have not established an underwriting arrangement for the sale of
these shares. Our officers and directors will be the only persons that will
conduct the direct public offering. They intend to offer and sell the shares in
the primary offering through their business and personal contacts. There is a
possibility that the minimum amount of proceeds will not be raised.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION SET
FORTH UNDER "RISK FACTORS" BEFORE INVESTING IN SUCH SECURITIES.
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 the prospectus. Any representation to the contrary is a
criminal offense.
This registration statement will be amended and completed from time to time, as
necessary.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until this Registration Statement filed with the
Securities and Exchange Commission is declared effective by the Securities and
Exchange Commission. 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.
The date of this prospectus is , 2004
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Table of Contents
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Page
----
Prospectus Summary 5
Risk Factors 7
Use of Proceeds 10
Determination of Offering Price 11
Market for Common Equity and Related Stockholder Matters 12
Equity Compensation Plan Information 12
Dividends 12
Penny Stock Considerations 13
Management's Discussion and Analysis or Plan of Operation 13
Business - Our Company 15
Description of Property 18
Legal Proceedings 18
Management Directors and Executive Officers 19
Executive Compensation 20
Principal Stockholders 22
Dilution 22
Selling Stockholders 23
Shares Eligible for Future Sale 24
Plan of Distribution 24
Certain Relationships and Related Transactions 26
Description of Securities 27
Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 28
Transfer Agent 28
Experts 28
Legal Matters 28
Financial Statements F-1
Part II.
Indemnification of Directors and Officers 29
Other Expenses of Issuance and Distribution 29
Recent Sales of Unregistered Securities 30
Exhibits 31
Undertakings 32
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PROSPECTUS SUMMARY
The following is a summary of material information which is supported in its
entirety by detailed information, including financial information and notes
thereto, contained in this prospectus. This highlighted summary is intended for
reference only. Before making any investment, you should carefully consider the
information under the heading "Risk Factors". Please note that throughout this
prospectus the words "Company", "we", "our" or "us", refer to Friday Night
Entertainment Corporation, and not to our selling stockholders.
About Us
We were incorporated in Nevada on July 31, 2001 under the name Lunettes, Et.
Al., Inc. We have remained inactive since incorporation. On June 10, 2004, we
acquired all of the issued and outstanding shares of Friday Night Entertainment
Pty. Ltd., an Australian company involved in producing feature films and
television programming in Australia. On June 11, 2004, we changed our name from
Lunettes, Et. Al., Inc. to Friday Night Entertainment Corporation and increased
our authorized share capital to 50,000,000 common shares and 5,000,000 preferred
shares, both par value $.001.
We are a development stage company formed for the purpose of producing feature
films and television programming in the United States. We will develop four of
our scripts that we acquired in our purchase of Friday Night Entertainment Pty
Ltd., as well as future screen plays that we acquire pursuant to option
agreements with screen writers. We will develop film and television products
from conception to pre-production, production and post-production stages. We
also propose to identify and acquire original materials, screenplays, novels,
manuscripts, ideas, remakes, and branded properties. We will finance some
products ourselves, and participate in the financing of larger projects. We
intend to utilize the industry contacts and expertise and know how of our
principals in achieving our business objectives.
Securities Offered By Us
The maximum amount of shares offered by us, on a "best efforts" basis is
1,000,000 common shares at $5.00 per share (or an aggregate offering price of
$5,000,000).
Up to an additional 950,000 common shares issuable upon the conversion of
options issued to Barr Eden Family Trust and Waldwick Investments Limited; and
up to an additional 50,000 shares of our common stock of Andrew Banks &
Associates Pty. Ltd. Although we are not presently qualified for public
quotation, we intend to qualify our shares for quotation on the NASD
Over-the-Counter Bulletin Board concurrently as of the effective date of this
prospectus or as soon as possible thereafter.
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Offering Period
During the Initial Offering Period, we will offer shares for a period of twelve
(12) months from the effective date of this prospectus, unless terminated
earlier, in our sole discretion. During this Initial Offering Period we will be
able to use funds immediately since the offering is on a "best efforts" basis.
Plan of Distribution
The offering of a maximum of 1,000,000 of our common shares, on a "best efforts"
basis, is being made on a self-underwritten basis by us through our officers and
directors who will not be paid any commission or other compensation and without
the use of securities brokers.
Currently, we have not established an underwriting arrangement for the sale of
these shares. Our officers and directors will be the only persons that will
conduct the direct public offering. They intend to offer and sell the shares in
the primary offering through their business and personal contacts. There is a
possibility that no proceeds will be raised or that if any proceeds are raised,
they may not be sufficient to cover the cost of the offering.
Our selling securities holders may be selling up to 950,000 common shares
issuable upon the conversion of options issued to Barr Eden Family Trust and
Waldwick Investments Limited; and 50,000 common shares of Andrew Banks &
Associates Pty. Ltd.. Such shares of our common stock may be sold from time to
time to purchasers directly by the selling security holders. Alternatively, the
selling shareholders may from time to time offer shares to underwriters,
dealers, or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling security holders for whom
they may act as agent. The selling security holders and any underwriters,
dealers or agents that participate in the distribution of our common stock may
be deemed to be underwriters, and any commissions or concessions received by any
such underwriters, dealers or agents may be deemed to be underwriting discounts
and commissions under the Securities Act. Shares may be sold from time to time
by the selling security holders in one or more transactions at a fixed offering
price, which may be changed, or at any varying prices determined at the time of
sale or at negotiated prices. We may indemnify any underwriter against specific
civil liabilities, including liabilities under the Securities Act. We will bear
all expenses of the offering of shares of our common stock by the selling
security holders other than payment that they may agree to make to underwriters.
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Application of Proceeds
The proceeds of this offering are to be used by us for the development of the
four movie scripts which we acquired through our acquisition of Friday Night
Entertainment Pty Ltd. We also intend to use proceeds from this offering in
order to acquire an option to develop a motion picture to be called "Asphalt
Beach." The balance of the proceeds of this offering are to be used to acquire
additional movie scripts pursuant to option agreements, and for general working
capital.
RISK FACTORS
The securities offered hereby are highly speculative and should be purchased
only by persons who can afford to lose their entire investment. Each prospective
investor should carefully consider the following risk factors, which are only a
few of the risks associated with this Offering, as well as all other information
set forth in this prospectus.
Our operation and future growth is heavily dependant upon our CEO, Mr. Cameron
Lamb, our President, Michael Costigan and other management personnel, and if we
lose the services of these employees we will be unable to develop our business.
We believe the efforts of our executive officers and other management personnel
including Mr. Lamb and Mr. Costigan are essential to our operations and growth.
The loss of either Mr. Lamb or Mr. Costigan or others could have a material
adverse effect on our financial condition, future success, and ability to
sustain operations. We do not carry key man life insurance on any such
individuals. We presently have a six (6) month consulting agreement with Michael
Costigan and we expect to enter into an employment agreement with Mr. Costigan
upon the successful closing of the Offering.
We have had a limited operating history and may not be able to continue to
successfully develop our business plan or achieve profitability.
We have essentially no operating history. Our success will depend largely upon
our ability to identify screenplays which have the potential to be successfully
packaged. Our ability to package screenplays with directors and talent will be
crucial to our success. Due to our start up nature, we do not have an existing
library of product that will provide consistent cash flow. We will depend on the
success of each of our productions to derive a consistent cash flow into the
future.
7
We will operate in a competitive industry with established companies that can
impact our market share and success.
We face significant competition from more established companies. We believe our
direct competition will include: Lions Gate Entertainment Corporation, New
Market Capital Group, Palm Picture Features, and Peace Arch Entertainment Group
Incorporated. All of these companies are well established. Our competition may
make it difficult for us to source quality screenplays outside of our writers
fund. This may inhibit us from reaching our business plan objectives and
financial forecast.
Sales by selling securities holders below the $5.00 offering price may cause our
stock price to fall and decrease demand in the primary offering which may
decrease the value of your investment.
The selling security holder offering will run concurrently with our primary
offering. All of our stock owned by the selling security holders will be
registered by the Registration Statement of which this prospectus is a part. The
selling security holders may sell some or all of their shares immediately after
they are registered. In the event that the selling security holders sell some or
all of their shares, which could occur while we are still selling shares
directly to investors in this offering, trading prices for the shares could fall
below the offering price of the shares. In such event we may be unable to sell
all of the shares to investors, which would negatively impact the offering. As a
result, our plan of operations may suffer from inadequate working capital.
You may not be able to liquidate your investments since there is no assurance
that a public market will develop for our common stock or that our common stock
will ever be approved for trading on a recognized stock exchange or quotation
medium.
There has been no trading market for the shares and none is anticipated to
develop in the near future. We intend to apply for a quotation on the Over the
Counter Bulletin Board concurrently with the filing of this offering. It is
unlikely that our trading market will develop in the near term, or that if
developed, it will be sustained. In the event the regular public trading market
does not develop, any investment in our stock would be highly illiquid.
Accordingly, an investor in our shares may not be able to sell the shares
readily, if at all.
This offering is being self-underwritten, and no independent due diligence has
been undertaken.
This offering is being self-underwritten by our officers and directors, and
potential investors should give careful consideration to all aspects of this
offering before any investment is made. In the absence of an underwriter, no due
diligence examination has been performed in conjunction with this offering such
as would have been performed in an underwritten offering.
8
Investors in this offering will bear the most risk of loss even though our
present officers and directors will control us.
Our present officers and directors, own 65.7% of our common shares (and
1,000,000 Series "A" preferred shares, each carrying 50 votes) before the
registration and the issuance of additional shares from this Offering. This
controlling interest was acquired at a cost substantially below the offering
price. Specifically, the aggregate amount paid for the interest acquired by
Cameron Lamb, Michael Costigan and Mark Pearson was $4,500 or $.001 per share.
Accordingly, purchasers of the shares offered will bear most of the risk of loss
although our control will be maintained by the existing stock owners by virtue
of their percentage of stock ownership.
The substantial capital requirements of funding a production with a lapse of
time before revenues are earned can cause our demise based on lack of cash flow.
The substantial capital requirements and financial risks associated with each
individual production are significant, given we have a planed output of four
feature film productions per annum. As a result, the failure of one feature film
to perform may significantly adversely affect our financial performance.
Secondly, in the event that distribution is delayed, the timing of revenue will
also be delayed. Both of these situations can cause our business to fail due to
lack of cash flow.
The failure to have an established film library can lead to cash flow problems
for us.
Given we do not have an existing library of films, we will rely on the success
of our own productions to build a film library with reliable cash flow. This
will be the case until we have acquired an existing film library. Our long term
viability will depend on our ability to establish a viable film library that can
generate positive cash flows into the future. If we are unable to develop a
viable film library, we will not generate the cash flows needed to make us
viable in the medium to long term future.
Unfavorable reviews on our films will have a negative effect on us and can lead
to our demise.
A great deal of our Independent film success will come from the audience
reaction on the Festival Markets and from press and industry reviews.
Unfavorable reviews could have a material effect on the success of our films and
the demise of our business.
Our Low budget films will rely on the ancillary market and the sale of DVD's to
provide revenue. The distribution of our films and sale of DVDs in the ancillary
market will largely be impacted by the awareness of our films, which can often
depend on the success at the box office.
The failure of a distributor or third party financier to source our films will
result in no development investment for a lengthy period and place us in a
negative light to the market place.
9
In the event that a distributor or third party financier cannot be sourced to
partner or offload production costs on larger feature films at a desirable time,
we may be in a position that we have no return on our development investment for
a lengthy period. This may also result in the production being of a lower
budget, often resulting in a lower quality director and/or talent. This would
potentially negatively impact the appeal of a film in the market place, and
hence our revenues. The second option would be that we would be forced to
postpone production until a third party is found. In this case, postponing would
result in us not having a return on our development investment.
It is imperative that we protect our intellectual property rights and the
failure to do so will have a negative impact on our business
Our business depends on intellectual and property law to safeguard our assets.
Our success in defending our intellectual property assets and also ensuring that
we do not infringe on the intellectual property rights of others can be an
expensive process, and can also have a significant effect on our business. Our
failure to protect our intellectual property assets, or the infringement on the
rights of others could have a material effect on our company in that it could
result in the abandonment of a film production or the payment of unknown royalty
fees.
Movie piracy is prevalent in our industry and can cause us to have reduced
revenues, increased production and distribution costs or abandonment of a
production.
The growth of the internet together with the advancement of digital technology
has created substantial piracy problems for the movie industry. We will not be
immune from this piracy. This piracy could take many forms and could impact our
business in many ways. For instance, the piracy threat comes from within the
industry where script writers, production companies and distributors pirate each
others ideas. In addition, the industry has to deal with consumer piracy, where
feature films contend with piracy at the distribution level and in the DVD
market. The piracy of our property could have a significant effect on the
production and distribution of our movies and could result in reduced revenues,
increased production and distribution costs or the abandonment of a production.
USE OF PROCEEDS
The net proceeds to us from this Offering, after deducting estimated offering
expenses of $75,000, are estimated to be approximately $4,925,000 assuming the
Maximum Offering is sold. We will not receive any proceeds from the sale of
shares by the selling security holders. We expect to use such net proceeds as
follows:
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Approximate Approximate Percentage
Application of Proceeds Dollar Amount of Net Proceeds
- ----------------------- ------------- ---------------
Purchase of movie options $ 1,000,000 20.3%
Production of Asphalt Beach $ 2,500,000 50.8%
Development of current scripts $ 500,000 10.1%
Working Capital and $ 925,000 18.8%
General Corporate Purposes (1)
Total.................. $ 4,925,000 100%
============= ===============
- --------------------
(1) Represents amounts to be used for working capital and general
corporate purposes, including rent expense, corporate overhead
including salaries, administration and ongoing professional fees.
The foregoing represents our best estimate of our allocation of the net proceeds
of the Maximum Offering based upon the current state of our business development
and management estimates of current industry conditions. We anticipate, although
there can be no assurance, that the net proceeds from the Maximum Offering will
only allow us to sustain our operations for a period of approximately twelve
(12) months. Upon completion of the Maximum Offering, we believe we will have
sufficient financing to operate our business for approximately twelve (12)
months following the completion of the Maximum Offering. The net proceeds may be
reallocated among the categories set forth above or otherwise depending upon the
state of our business operations and other factors, many of which are beyond our
control. See "Risk Factors."
DETERMINATION OF OFFERING PRICE
The initial public offering price of the shares of our common stock has been
determined arbitrarily by us and does not necessarily bear any relationship to
our book value, assets, past operating results, financial condition or any other
established criteria of value. Although our common stock is not listed on a
public exchange, we will be filing to obtain a quotation on the OTC Bulletin
Board concurrently with the filing of this prospectus. However, there is no
assurance that our common stock, once it becomes publicly quoted or listed, will
trade at market prices in excess of the initial public offering price as prices
for the common stock in any public market which may develop will be determined
by the market and may be influenced by many factors, including the depth and
liquidity of the market for the common stock, investor perception of us, and
general economic and market conditions.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not currently traded on any recognized stock exchange. There
is no current public trading market for our shares of common stock. After this
Registration Statement becomes effective, we intend to apply for a quotation on
the OTC Bulletin Board. While we intend to take needed action to qualify our
common shares for quotation on the NASD OTCBB, there is no assurance that we can
satisfy the current listing standards. As of November 9, 2004, based on our
transfer agent records, we had shareholders holding 6,395,000 shares of our
common stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of November 9, 2004, with
with respect to compensation plans under which our equity securities are
authorized for issuance:
(a) (b) (c)
-------------------- -------------------- -------------------
Number of securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securites
warrants and rights warrants and rights reflected in column (a))
-------------------- -------------------- -------------------
Equity compensation
plans approved by
security holders None
Equity compensation
plans not approved
by security holders None
Total None
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy
to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends. There can be
no assurance that we can achieve such earnings.
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PENNY STOCK CONSIDERATIONS
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker- dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit their
market price and liquidity of our securities. Broker- dealers who sell penny
stocks to certain types of investors are required to comply with the
Commission's regulations concerning the transfer of penny stocks. These
regulations require broker- dealers to:
- - Make a suitability determination prior to selling a penny stock to the
purchaser;
- - Receive the purchaser's written consent to the transaction; and
- - Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
Friday Night Entertainment Corporation (formerly Lunettes, Et Al, Inc.) was
incorporated in July 2001 and remained dormant until the acquisition in June
2004 of Friday Night Entertainment Pty Ltd., an Australian corporation involved
in the development and production of movies.
Operations
In May 2004 Friday Night Entertainment Pty Ltd.(the Australian subsidiary)
acquired the rights to four movie scripts from Cameron Lamb in exchange for 100%
of the share capital of Friday Night Entertainment Pty Ltd.(Australian
Corporation).
In June 2004, Friday Night Entertainment Corporation acquired all of the share
capital of Friday Night Entertainment Pty Ltd. in the exchange for 4,500,000
common shares and 1,000,000 preferred Series "A" shares of the Company. This
resulted in the shareholders of Friday Night Entertainment Pty Ltd. acquiring
75% of the issued and outstanding common share capital and 100% of the preferred
series "A" capital of the Company.
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The holding Company does not have any operational activity and all operations
are conducted through the Company's only subsidiary, Friday Night Entertainment
Pty Ltd.
Because the acquisition of the subsidiary was acquired in a reverse take over
using a dormant holding Company, the accounts of the Company are those of the
Subsidiary.
Financial Results
In May 2004, Friday Night Entertainment Pty Ltd. acquired the rights to four
movie scripts from Cameron Lamb in a transaction valued at $347,600. The
Company's objective is to further develop and produce these scripts over the
next twelve months and to finalize distribution agreements with a major motion
picture distributors. Since incorporation in May 2004 through June 30th 2004,
the Company had no income. During this period, the company incurred expenditures
of $106,864 . The expenditures were incurred in start-up costs associated with
commencing operations. In this regard, the Company incurred $9,887 in legal and
accounting expenses, $41,899 in salaries and wages, $12,800 in stock-based
compensation, $24,905 in relocation costs associated with moving the operations
to the U.S., and $17, 373 in general administration costs.
The Company has made significant inroads in providing the infrastructure
necessary to commence production of its movies. It is also well placed to begin
soliciting promising new scripts.
NOTE PLANS FOR THE NEXT TWELVE MONTHS
1. Immediate Priorities:
Financing:
The Company acquired its principal assets, being its intangible movie scripts in
exchange for share capital of the corporation. Additional working capital
requirements were funded through the sale of common shares pursuant to
exemptions from the registration requirements under the Securities Act of 1933,
as amended..
The Company will require $5,000,000 over the next 12 months in order to meet its
movie production and distribution targets. This funding is expected to be
achieved through private placements and the sale of the company's stock through
a registration statement.
Office Setup:
FNE will sign lease agreement at the Jim Henson Company:
1416 North La Brea Avenue
Hollywood, CA 90028
United States of America
14
FNE will rollout office structure, inclusive all operational, administrative and
financial systems. FNE will concurrently recruit all needed employees.
Production:
FNE will finalize development of the initial productions, so they can go into
immediate pre-production.
Asphalt Beach is scheduled to begin production as soon practical following funds
becoming available, with a budget of $2,500,000, followed by FNE's second
Independent feature film ($2,000,000) in August 2005. FNE hopes to grow to a
size of 4 feature films per annum provided that we have a role as a financier as
well as producer.
Secure relationships with Writers:
FNE will select eight Writers over a period of six months who will each be under
contract to supply FNE with two screenplays per annum.
Distribution/Marketing:
FNE will secure distribution for initial productions during the development
stage on a case-by-case basis.
2. Lower Priorities:
Titles and branded entertainment:
FNE will actively seek to acquire established international titles (television,
family properties, comic book, literary, sequel opportunities and music) and
properties to develop for motion pictures, which will also have merchandising
appeal
Libraries:
FNE will pursue opportunities to acquire libraries on a perpetual basis. FNE
will be extremely selective. Finalizing on an acquisition will only occur if it
meets our specific criteria.
BUSINESS - OUR COMPANY
We were incorporated in Nevada on July 31, 2001 under the name Lunettes, Et.
Al., Inc. We have remained inactive since incorporation. On June 10, 2004, we
acquired all of the issued and outstanding shares of Friday Night Entertainment
Pty. Ltd., an Australian company involved in producing feature films and
television programming in Australia. It became our wholly owned subsidiary. In
exchange, we issued an aggregate of 4,500,000 of our common shares and 1,000,000
of our Series "A" Preferred Shares to the shareholders of Friday Night
Entertainment Pty. Ltd.
15
On June 11, 2004, we changed our name from Lunettes, Et. Al., Inc. to Friday
Night Entertainment Corporation and increased our authorized share capital to
50,000,000 common shares and 5,000,000 preferred shares, both par value $.001.
Our principals are Cameron Lamb, Michael Costigan, and Mark Pearson. We are
focused on producing feature films in the United States from creation through to
finished product. In addition, we will build a stable of television programming
from the concept stage.
We will identify and acquire projects for development and production of motion
pictures. We will exploit original materials, screenplays, novels, manuscripts,
ideas, remakes, and branded properties. By exploiting contacts in the
entertainment industry, we will package projects and screenplays with quality
directors and star talent. Such projects will then be packaged and presented to
third party financiers in order to finance production and distribution. We will
also create original television programming.
Writers Fund: Original Material
We propose to select and contract eight (8) writers, each of whom will produce
two original screenplays per year. Each script will be optioned to us for a
period of eighteen (18) months, with the possibility of renewing such options.
We will maintain rights to each script as executive producer in perpetuity, even
if we no longer hold the option.
Development Fund
A development fund will be established in order for us to option (additional
screenplays to those sourced from the writers mentioned above) and develop
properties primarily into screenplays. We will also option screenplays or other
source materials for packaging with directors and/or star casting prior to
approaching third party financing. This fund will allow the company to maximize
a project and take it to the stage where an advantageous deal can be made when
laying off all costs to third party financiers and/or studios.
Independent Movies
We will attempt to finance movies with budgets up to $2,000,000. We will exploit
emerging talent for projects with niche market appeal. We will retain ancillary
rights to the independent movies we finance including DVD, music, foreign sales,
and merchandising rights.
Low Budget Features
We will produce movies with budgets up to $10,000,000 and will be packaged with
star directors and talent. Financing for such products will be derived from our
cash flow, third party financiers, or a combination of both.
16
Studio Pictures
We will have two business models applied to studio pictures with budgets greater
than $10,000,000.
(a) We will finance development and lay off all costs to studios or third
party financiers. Third party financiers will assume all production
costs as well as further printing, advertising costs, including
marketing; or
(b) For larger budget studio pictures, or where rights/scripts exceed
$10,000,000, we will sell properties to studios without incurring
development costs. In such cases we will function solely as a producer
and will participate in production and will receive ancillary fees at
a different return.
Titles and Branded Entertainment
We will actively seek established international titles (television, family
properties, comic books, literary, sequel opportunities, and music) and
properties to develop for motion picture release. We expect to select titles
based on merchandising appeal which is consistent with our strategy of
annuity-type income streams.
Television Programming
We will develop new television concepts. Television activities will allow us to
realize returns in three key areas:
1. Exploitation of ancillary and television rights to our feature film
projects;
2. Provide an additional avenue to allow development of all titles and
branded entertainment acquired by us; and
3. Reality programming for networks, exploiting development ideas.
Overview
We will utilize the industry relationships of our principals on a day-to-day
basis. Michael Costigan's relationships developed through his production
experience on both the studio and independent production sides of the motion
picture industry. Cameron Lamb has developed extensive relationships through his
experience in the media sector and television production arena. Mark Pearson
will assist us in structuring any financing required by us and in managing the
day-to-day financial aspects of our various production projects.
17
We expect to retain personnel in the following roles, once pre-production of our
first project has begun:
1. Personal Assistants (3), to provide general administrative support to
Michael Costigan, Mark Pearson, and Cameron Lamb;
2. Bookeeper/ Accountant (1) to provide bookkeeping services to us;
3. Creative Developer/Story editor (1) to provide support to Michael
Costigan and to provide editing of screenplays;
4. IT Administration, (1) to provide IT infrastructure and on-going
support to the Company.
5. Television Producer, (1) to develop, market, and produce concepts for
US television networks; and
6. Creative Developer/Junior Producer, (1) to assist the Television
Producer in the creative process and in the final production of
television concepts.
We will retain such other personnel as is required from time to time for each
production project.
Strategic Opportunities
We will also seek, on a global basis, businesses operating as going concerns in
order to acquire strategic equity positions.
Employees
As of November 9, 2004, we have 3 employees, Michael Costigan, Cameron Lamb and
Mark Pearson, our 3 officers. We have never had a work stoppage, and no
employees are represented under collective bargaining agreements. We consider
our relations with our employees to be good.
DESCRIPTION OF PROPERTY
We do not currently own or lease any property. We currently use office space
located at The Jim Henson Company, 1416 La Brea, Los Angeles CA 90028. These
facilities are currently leased by our officer and director, Mr. Michael
Costigan's company. We do not pay Mr. Costigan any rent for these facilities. We
intend to transfer the lease on these offices as soon as practical following the
raising of sufficient funds.
LEGAL PROCEEDINGS
Neither our parent company nor our subsidiary, or any of their properties, is a
party to any pending legal proceeding. We are not aware of any contemplated
proceeding by a governmental authority. Also, we do not believe that any
director, officer, or affiliate, any owner of record or beneficially of more
than five percent of the outstanding common stock, or security holder, is a
party to any proceeding in which he or she is a party adverse to us or has a
material interest adverse to us.
18
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and
directors
Name Age Position
- ---- --- --------
Cameron Lamb 26 Chief Executive Officer and
Chairman of the Board of Directors
Michael Costigan 36 President and Director
Mark Pearson 37 Chief Financial Officer and Director
Cameron has a vast array of experience in the media industry from operations to
management. Cameron worked with the Nine Network of Australia from 1993 to 1998
where he gained significant experience in all aspects of the industry including
production. During 1999, Cameron served as a member of management at a
television research company, Audience Development Pty Ltd., that functioned
within a monopolistic environment. While there, Cameron developed intuitive
insight into the audience.
Cameron further honed his skills working for an entertainment company, Banksia
Entertainment Pty Ltd. During his employment from 2000 through 2003, Cameron was
the lead in a start-up Above-the-Line advertising agency by the name of Oil Pty
Ltd, whose largest clients were in the media arena. He also played a key role in
Banksia Productions Pty Ltd, the group's production company. At the same time,
he was integral in setting up an Australian alliance between an international
group, Media Review International Pty Ltd, that watermarks and reports
everything that airs on broadcast television within Australia. The business's
clients included media buyers, music publishers, feature film producers and
television producers.
Cameron has proven expertise in the management of Media and Production
businesses. Such experience will prove to be essential given the start-up nature
of Friday Night Entertainment. His experience will also be valuable to the
ongoing management of development and production efforts and day-to-day
negotiations with the major motion picture distributors.
Michael Costigan is our President and Director. He is presently in production on
the feature film Brokeback Mountain, which stars Heath Ledger (A Knight's Tale,
Monsters Ball), Jake Gyllenhaal (Day After Tomorrow), and is being directed by
Ang Lee (Crouching Tiger, Hidden Dragon, Sense and Sensibility, The Ice Storm).
It is a love story based on Annie Proulx's (The Shipping News) short story. The
screenplay is by Larry McMurtry & Diana Ossana, who wrote classic, best-selling
novels and films including Hud, Last Picture Show, Lonesome Dove, and Terms of
Endearment. The film will be released by Focus Features, with an expected Fall
2005 release.
19
Previously, Michael spent nine years at Columbia Pictures, four years of which
he was Executive Vice President of Production, and for three years was Vice
President, Production. During that time he acquired, developed, and supervised
all aspects of production for films including "Charlie's Angels", "Snatch", "The
People Versus Larry Flynt", "Cruel Intentions", "To Die For", "Gattaca", "Bottle
Rocket", "The Tailor of Panama", "The Craft", and "Stuart Little".
Michael also acquired the screenplay for "Fifty First Dates", which was released
in 2004 and starred Adam Sandler and Drew Barrymore, and he acquired and
developed "About Schmidt", which Alexander Payne wrote and directed, and starred
Jack Nicholson.
Michael is a graduate of Brown University, and was cited by Hollywood Reporter's
"Next Generation" issue.
Mark Pearson is our Chief Financial Officer and director. Mark is a finance
professional with extensive management and operational experience. Having worked
at a Big 4 accounting firm for 8 years, Mark achieved the level of Senior
Manager before moving from the chartered environment.
Mark subsequently accepted a position as the General Manager of Finance for a
medium sized manufacturing operation. Over the next 4 years, he gained
considerable commercial experience at an executive level. Additionally, Mark
undertook extensive postgraduate studies in the areas of management, finance,
and law.
With his latest employer, an ASX listed public company, Mark served as Chief
Financial Officer and Company Secretary and was responsible for all financial,
administrative, and compliance matters.
Mark's combination of commercial, operational and academic qualifications will
enable him to provide Friday Night Entertainment with astute financial advice.
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and long-term
compensation, on an annualized basis for the 2003 fiscal year, for our Chief
Executive Officer and for each of our other executive officers (the "Named
Executive Officers") whose compensation on an annualized basis is anticipated to
exceed $100,000 during fiscal 2003.
20
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL ANNUAL STOCK UNDERLYING OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS (NO. OF SHARES) COMPENSATION
- -------- ---- ------ ----- ------------ ------ -------------- ------------
Cameron Lamb 2004 (1) $ 175,000 0 0 0 0 $
2003 (1) $ 0 0 0 0 0 $
Michael Costigan 2004 (1) $ 300,000 0 0 0 0 $
Mark Pearson 2004 (1) $ 125,000 0 0 0 0 $
These salaries will not commence until funding based on this offering is
completed.
Compensation of Directors
- -------------------------
Our directors will not receive compensation for services provided as a member of
our Board of Directors or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings.
Executive Compensation
- ----------------------
We presently have not negotiated any employment agreements with our management
personnel to retain their services, but we will enter into service contracts
with our three officers as soon as funding is secured.
STOCK OPTIONS
To date, we have not granted any stock options to directors and officers.
The following table sets forth information with respect to stock options granted
to the Named Executive Officers during fiscal year 2003:
OPTION GRANTS IN FISCAL 2003
(INDIVIDUAL GRANTS)(1)
NUMBER OF % OF TOTAL OPTIONS
SECURITIES UNDERLYING GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION
NAME OPTIONS GRANTED FISCAL PRICE DATE
2003
----
None
21
PRINCIPAL STOCKHOLDERS
To the knowledge of our directors and executive officers, the following are the
only persons beneficially owning, directly or indirectly, or exercising control
or direction over more than 5% of voting rights attached to the shares of our
common stock both prior to the Offering and after giving effect to the Offering
and the exercise of the options being registered in this Registration Statement:
- ------------------------------ -------------------------------------- ------------------------------------
Prior to the Offering After the Offering(1)
- ------------------------------ -------------------------------------- ------------------------------------
Percentage Of Percentage Of
Number Of Common Shares Number Of Common Shares
Common (Non-Diluted / Common (Non-Diluted /
Name Shares Fully Diluted)(1) Shares Fully Diluted)(1)
- ------------------------------ ---------------- --------------------- ------------- ---------------------
Cameron Lamb (3) 1,785,000(2) 27.9% 1,785,000 21.4%
- ------------------------------ ---------------- --------------------- ------------- ---------------------
Michael Costigan (3) 1,785,000(2) 27.9% 1,785,000 21.4%
- ------------------------------ ---------------- --------------------- ------------- ---------------------
Mark Pearson (3) 630,000(2) 9.85% 630,000 7.5%
- ------------------------------ ---------------- --------------------- ------------- ---------------------
1. Assuming the Maximum Offering is fully subscribed for and all of the
outstanding Options are exercised.
2. Excludes Series "A" Preferred Shares held by Cameron Lamb 425,000;
Michael Costigan 425,000; and Mark Pearson 150,000.
3. Includes common shares held indirectly by the directorsas follows:
Cameron Lamb's shares are owned by Charlotte and Jackson, Inc.;
Michael Costigan's shares are owned by Corduroy Films Inc.; and Mark
Pearson's shares are owned by MJP Holdings, Inc.
Fully Diluted Share Capital
The following table sets forth our issued and outstanding share capital, on both
a non-diluted and a fully-diluted basis, after the Offering.
- -------------- ------------------------------------------ ------------------------------------------
Minimum Offering Maximum Offering
- -------------- ------------------------------------------ ------------------------------------------
Percentage Percentage
Common Warrants/ of Voting Common Warrants/ of Voting
Holders Shares Options Stock(1) Shares Options Stock(1)
- -------------- ------------- ------------- -------------- ------------- ------------- --------------
Current
shareholders
of the
Company 6,395,000 950,000 88.0% 6,395,000 950,000 88.0%
- -------------- ------------- ------------- -------------- ------------- ------------- --------------
Purchasers
under the
Offering 1,000,000 12.0% 1,000,000 12.0%
- -------------- ------------- ------------- -------------- ------------- ------------- --------------
- -------------- ------------- ------------- -------------- ------------- ------------- --------------
TOTALS: 7,395,000 950,000 7,395,000 950,000
- -------------- ------------- ------------- -------------- ------------- ------------- --------------
Fully
Diluted(1): 8,345,000 100% 8,345,000 100%
- -------------- --------------------------- -------------- --------------------------- --------------
1. On a non-diluted/fully diluted basis. "Fully diluted" means that all
outstanding options and other convertible securities have been
exercised. Messrs. Lamb, Costigan and Pearson also holds 1,000,000
Series "A" preferred shares as follows: 425,000,425,000 and 150,000,
respectively, which are not included for calculation purposes since
there are no conversion rights for such shares. The shares do carry 50
votes in general and special meetings.
DILUTION
After giving effect to the sale of 1,000,000 shares of our common stock (less
estimated expenses of this offering), our pro forma net tangible book value
attributable to the holders of the shares of our common stock at June 30, 2004
was $0.72 per share, representing an immediate increase in net tangible book
value of approximately $0.66 per share to the existing stockholders and an
immediate dilution of $4.18 per share to the new investors.
22
Furthermore, after giving effect to the sale of 1,000,000 shares of Common Stock
to the new investors in this offering, such investors will hold 13.6 % of our
outstanding shares of common stock and will have contributed 93% of the
consideration.
SELLING STOCKHOLDERS
Of the 2,000,000 of our common shares to be covered by this prospectus, a
maximum of 1,000,000 shares are being offered by us and the remaining 1,000,000
are being offered by our option security holders (950,000) and a shareholder
(50,000). The 950,000 shares are issuable upon exercise of options held by
Waldwick Investments Limited (450,000 options) and Barr Eden Family Trust
(500,000 options). The 50,000 shares are held by Andrew Banks & Associates Pty.
Ltd.
The following table sets forth the name of each selling security holder, the
number of shares of common stock beneficially owned by the selling security
holders as of November 9, 2004, and the number of shares being offered by each
selling security holder.
Shares of Common Percent of Common Shares of Common Number of Shares Percent
Name of Selling Stock Owned Prior Shares Owned Prior Stock to be sold in owned after of shares owned
Stockholder to the offering to the offering the offering (2) the offering () after offering
- -------------------------- --------------- --------------- ------------------- -------------- --------------
Barr Eden Family Trust 500,000 (2) 7.8% 500,000 (2) 500,000 6.0%
- -------------------------- --------------- --------------- ------------------- -------------- --------------
Waldwick Investments Ltd. 450,000 (3) 7.0% 450,000 (3) 450,000 5.4%
- -------------------------- --------------- --------------- ------------------- -------------- --------------
Andrew Banks&Assoc.Pty.Ltd. 50,000 0.8% 50,000 0 0.0%
- -------------------------- --------------- --------------- ------------------- -------------- --------------
(1) Assumes all of the shares of common stock offered in this prospectus
are sold and no other shares of common stock are sold during the
offering period. The percentage of shares is based on shares issued
and outstanding as of November 9, 2004.
(2) Barr Eden Family Trustalso owns 500,000 options which convert into
500,000 shares of our common stock. Such options are being registered
in this prospectus and are not included in the amount of shares owned
prior to the offering.
(3) Waldwick Investments Limited also owns 450,000 options which convert
into 450,000 shares of our common stock. Such options are being
registered in this prospectus and are not included in the amount of
shares owned prior to the offering.
Our non-affiliate selling shareholders will sell at a fixed price per share
until our shares are quoted on the OTC Bulletin Board (or any other specified
market). Thereafter, such selling shareholders shall sell at prevailing market
prices or privately negotiated prices.
23
SHARES ELIGIBLE FOR FUTURE SALE
As of November 9, 2004 there are no shares of Common Stock currently issued and
outstanding which are freely tradable without restrictions under the Securities
Act. In general, under Rule 144 as currently in effect, any of our affiliates
and any person (or persons whose sales are aggregated) who has beneficially
owned his or her restricted shares for at least one year, is entitled to sell in
the open market within any three-month period a number of shares of common stock
that does not exceed the greater of (i) 1% of our then outstanding shares of
common stock, or (ii) the average weekly trading volume in our common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 also
are subject to certain limitations on manner of sale, notice requirements, and
the availability of current public information about us. Our non-affiliates who
have held their restricted shares for two years are entitled to all their shares
under Rule 144 without regard to any of the above limitations, provided they
have not been affiliates for the three months preceding such sale. Shares held
by shareholders who were promoters or affiliates of the blank check company even
after a merger with us, may not be sold in reliance on Rule 144. We are not
quoted on the OTC Bulletin Board. Following this offering, no predictions can be
made of the effect, if any, of future public sales of restricted securities or
the availability of restricted securities for sale in the public market.
Moreover, we cannot predict the number of shares of our common stock that may be
sold in the future pursuant to Rule 144 because such sales will depend on, among
other factors, the market price of our common stock and the individual
circumstances of the holders thereof. The availability for sale of substantial
amounts of our common stock under rule 144 could adversely affect prevailing
market prices for our securities.
PLAN OF DISTRIBUTION
The offering of a maximum of 1,000,000 of our common shares is being made on a
self- underwritten basis by us through our officers and directors who will not
be paid any commission or other compensation and without the use of securities
brokers.
Currently, we have not established an underwriting arrangement for the sale of
these shares. Our officers and directors will be the only persons that will
conduct the direct public offering. They intend to offer and sell the shares in
the primary offering through their business and personal contacts. There is a
possibility that no proceeds will be raised or that if any proceeds are raised,
they may not be sufficient to cover the cost of the offering.
Our officers and directors are the only persons that plan to sell our shares of
common stock. None of them are registered broker-dealers. They intend to claim
reliance on Exchange Act Rule 3a4-1 which provides an exemption from the
broker-dealer registration requirements of the Exchange Act for persons
associated with an issuer. Specifically, each of them (i) at the time of sale,
will not be subject to a statutory disqualification as that term is defined in
section 3(a)39 of the Securities Act; (ii) will not be compensated in connection
with his participation in the offering by payment of commissions or other
remuneration; at the time of participation in the sale of shares, he will not be
24
an associated person of a broker or a dealer; (iv) pursuant to Rule
3a4-1(a)(4)(ii), each of them will meet all of the following requirements: at
the end of the offering, they will perform substantial duties for us, other than
in connection with transactions in securities; each of them was not a broker or
dealer, or an associated person of a broker or dealer within the last 12 months;
and each of them has not participated in, or does not intend to participate in,
selling an offering of securities for any issuer more than once every 12 months
other than in reliance on paragraph(a)(4)(i) or (iii) of Rule 3a4-1.
The selling security holder offering will run concurrently with the primary
offering. The selling security holders may sell some or all of their shares
immediately after they are registered. There is no restriction on the selling
security holders to address the negative effect on the price of your shares due
to the concurrent primary and secondary offering. In the event that the selling
security holders sell some or all of their shares, which could occur while we
are still selling shares directly to investors in this offering, trading prices
for the shares could fall below the offering price of the shares. In such event,
we may be unable to sell all of the shares to investors, which would negatively
impact the offering. As a result, our planned operations may suffer from
inadequate working capital.
The selling option holders shares may be sold or distributed from time to time
by the selling stockholders or by pledges, donees or transferees of, or
successors in interest to, the selling stockholders, directly to one or more
purchasers (including pledgees) or through brokers, dealers or underwriters who
may act solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be effected in one or more of the following
methods:
o ordinary brokers transactions, which may include long or short sales,
o transactions involving cross or block trades on any securities or market
where our common stock is trading,
o purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus, "at the
market" to or through market makers or into an existing market for the common
stock,
o in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
o through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally available means.
25
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933,
and any commissions received by them and any profit realized by them on the
resale of shares as principals may be deemed underwriting compensation under the
Securities Act of 1933. Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $75,000.
We have informed the selling stockholders that certain anti-manipulative rules
contained in Regulation M under the Securities Exchange Act of 1934 may apply to
their sales in the market and have furnished the selling stockholders with a
copy of such rules and have informed them of the need for delivery of copies of
this prospectus. The selling stockholders may also use Rule 144 under the
Securities Act of 1933 to sell the shares if they meet the criteria and conform
to the requirements of such rule.
Notwithstanding the above, our non-affiliate selling shareholders will sell at a
fixed price per share until our shares are quoted on the OTC Bulletin Board (or
any other specified market). Thereafter, such selling shareholders shall sell
at prevailing market prices or privately negotiated prices.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 11, 2004, we issued 4,500,000 shares of our common stock and issued
1,000,000 shares of our restricted Series "A" preferred shares, to Clam
Entertainmant Pty Ltd, a corporation controlled by Cameron Lamb, our officer and
director, in consideration for all of the issued and outstanding stock of Friday
Night Entertainment Pty Ltd. The issuance was valued at $.06 per share or
$347,600 in the aggregate. Clam Entertainment Pty Ltd then transferred to our
directors and officers, Messrs. Lamb, Costigan and Pearson, 1,785,000 ,1,785,000
and 630,000 common shares and 425,000, 425,000 and 150,000 preferred series "A"
shares, respectively.
On June 1, 2004, we entered into a Consulting Agreement with Corduroy Films,
Inc., a company owned by Michael Costigan, our President and director. The
Consulting Agreement provides that Mr. Costigan will provide advisory and
consulting services to the Company for a term of six (6) months, in exchange for
compensation in the amount of $20,000 per month. The Consulting Agreement will
terminate prior to the end of the six month period if we are successful in
financing its operations, at which time Mr. Costigan will enter into a formal
employment agreement with us.
26
Waldwick Investments Limited, a company owned by Mr. Kevin Murray owned 7.4% of
our common stock prior to the acquisition of Friday Night Entertainment Pty.
Ltd. and also holds 450,000 options.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
Common Stock
We are presently authorized to issue 50,000,000 shares of $.001 par value common
stock. At November 9, 2004, we had 6,395,000 shares of common stock outstanding.
The holders of our common stock are entitled to equal dividends and
distributions when, as, and if declared by the Board of Directors from funds
legally available therefore. No holder of any shares of common stock has a
preemptive right to subscribe for any of our securities, nor are any common
shares subject to redemption or convertible into other of our securities, except
for outstanding options described above. Upon liquidation, dissolution or
winding up, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. All shares of common stock now outstanding are
fully paid, validly issued and non- assessable. Each share of common stock is
entitled to one vote with respect to the election of any director or any other
matter upon which shareholders are required or permitted to vote. Holders of our
common stock do not have cumulative voting rights, so the holders of more than
50% of the combined shares voting for the election of directors may elect all of
the directors if they choose to do so, and, in that event, the holders of the
remaining shares will not be able to elect any members to the Board of
Directors.
Preferred Stock
We are authorized to issue up to 5,000,000 shares of $.001 par value preferred
stock. At November 9, 2004, we have issued 1,000,000 series "A" preferred shares
as follows: Cameron Lamb - 425,000; Michael Costigan - 425,000 and Mark Pearson
- - 150,000. Each of the preferred shares carry no dividend rights, no liquidation
rights, no pre-emptive rights, no conversion rights and no redemption rights but
carry 50 votes in general and special meetings. The remaining 4,000,000
preferred shares have not been issued. Under our Certificate of Incorporation,
the Board of Directors will have the power, without further action by the
holders of the common stock, to designate the relative rights and preferences of
the preferred stock, and to issue the preferred stock in one or more series as
designated by the Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the common stock or the preferred stock of any
other series. The issuance of preferred stock may have the effect of delaying or
preventing a change in control of our company without further shareholder action
and may adversely affect the rights and powers, including voting rights, of the
holders of common stock. In certain circumstances, the issuance of preferred
stock could depress the market price of the common stock.
27
Options
On May 24, 2004, we issued a total of 1,000,000 options. 500,000 options each to
Waldwick Investments Limited and Fort Street Equity, Inc. Each option provides
the option holder the right to purchase one share of our common stock at the
greater of : (1) a 40% discount from the average closing bid price of our common
stock on a public exchange during the 10 trading days immediately prior to the
exercise of the option or (2) $.50 per share. The options can be exercised at
any time until December 31, 2005. On October 30, 2004, Fort Street Equity Inc.
sold all of its options to Barr Eden Trust. On November 1, 2004, Waldwick
Investments Limited sold 50,000 options to Andrew Banks & Associates Pty. Ltd.
Immediately after such sale, Andrew Banks & Associates Pty. Ltd. exercised the
50,000 options at a price of $0.50 and received 50,000 shares of our common
stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On October 25, 2004, we replaced SF Partnership, LLP as our independent auditor
and appointed Davis Accounting Group P.C. as our new independent auditor. SF
Partnership, LLP was replaced due to the fact that the United States Securities
and Exchange Commission interpreted Article 2 to Regulation S-X to require that
the audit report on the financial statements of a domestic registrant be
rendered ordinarily by an auditor licensed in the United States. SF Partnership,
LLP was not licensed in the United States.
Davis Accounting Group P.C.'s report on the financial statements for the period
ended June 30, 2004 contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to audit scope or accounting principles.
During the most recent fiscal period and period subsequent to June 30, 2004,
there have been no disagreements with Davis Accounting Group P.C. on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which disagreements if not resolved to the
satisfaction of Davis Accounting Group P.C. would have caused them to make
reference in their reports on the financial statements for such periods.
During the two most recent fiscal years and the interim period subsequent to
June 30, 2004, there have been no disagreements with Davis Accounting Group
P.C., our independent auditor, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
TRANSFER AGENT
The Transfer Agent and Registrar for our common stock is Brookhill Stock
Transfer, 1192 Draper Parkway, #511, Draper, UT 84020-9095. Its telephone number
is (801) 619-0889.
EXPERTS
The financial statements included in this prospectus have been audited by Davis
Accounting Group P.C., independent auditors, as stated in their report appearing
herein and elsewhere in the registration statement (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to our
recurring losses from operations which raise substantial doubt about our ability
to continue as a going concern), and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow &
Jaclin, LLP, Manalapan, New Jersey 07726.
28
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (MAY 5, 2004)
THROUGH JUNE 30, 2004
Report of Independent Auditors...............................................F-2
Financial Statements-
Balance Sheet as of June 30, 2004.........................................F-3
Statement of Operations and Comprehensive (Loss) From Inception
(May 5, 2004) Through June 30, 2004.......................................F-4
Statement of Stockholders' Equity From Inception (May 5, 2004)
Through June 30, 2004....................................................F-5
Statement of Cash Flows From Inception (May 5, 2004) Through
June 30, 2004............................................................F-6
Notes to Financial Statements ...........................................F-7
F-1
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Friday Night Entertainment Corporation:
We have audited the accompanying balance sheet of Friday Night Entertainment
Corporation, a Nevada corporation in the development stage, as of June 30, 2004,
and the related statements of operations and comprehensive (loss), stockholders'
equity, and cash flows for the period from inception (May 5, 2004) through June
30, 2004. 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 standards of the Public Company
Accounting Oversight Board (United States). 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 Friday Night Entertainment
Corporation as of June 30, 2004, and the results of its operations and its cash
flows for the period from inception (May 5, 2004) through June 30, 2004, in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the development stage, is conducting its
capital formation activities, has experienced an operating loss since inception,
and its working capital is insufficient to meet planned business objectives.
These and other factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding these matters are also
described in Note 2 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Respectfully submitted,
/s/ Davis Accounting Group P.C.
Cedar City, Utah
November 9, 2004
F-2
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (NOTE 2)
AS OF JUNE 30, 2004
ASSETS
2004
---------
Current Assets:
Prepaid expenses and other assets $ 19,868
---------
Total current assets 19,868
---------
Other Assets:
Entertainment products in development 347,600
---------
Total other assets 347,600
---------
Total Assets $ 367,468
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Other current liabilities $ --
---------
Total current liabilities --
---------
Total liabilities --
---------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, par value $.001 per share; 4,000,000 shares
undesignated; no shares issued or outstanding --
Series A Preferred Stock, par value $.001 per share;
designated 1,000,000 shares; issued and
outstanding 1,000,000 shares 1,000
Common Stock, par value $.001 per share;
authorized 50,000,000 shares; issued and
outstanding 6,265,000 shares 6,265
Additional paid-in capital 468,135
Accumulated other comprehensive (loss) (1,068)
(Deficit) accumulated during the development stage (106,864)
---------
Total stockholders' equity 367,468
---------
Total Liabilities and Stockholders' Equity $ 367,468
=========
The accompanying notes to financial statements are
an integral part of this balance sheet.
F-3
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) (NOTE 2)
FOR THE PERIOD FROM INCEPTION (MAY 5, 2004)
THROUGH JUNE 30, 2004
Cumulative
From
2004 Inception
----------- -----------
Revenues:
Revenues $ -- $ --
----------- -----------
Total revenues -- --
----------- -----------
Expenses:
General and administrative-
Stock compensation 12,800 12,800
Other general and administrative 94,064 94,064
----------- -----------
Total general and administrative expenses 106,864 106,864
----------- -----------
(Loss) from Operations (106,864) (106,864)
Other Income (Expense) -- --
Provision for income taxes -- --
----------- -----------
Net (Loss) (106,864) (106,864)
----------- -----------
Comprehensive (Loss):
Australian currency translation (1,068) (1,068)
----------- -----------
Total Comprehensive (Loss) $ (107,932) $ (107,932)
=========== ===========
(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted $ (0.033) $ (0.033)
=========== ===========
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 3,224,649 3,224,649
=========== ===========
The accompanying notes to financial statements are
an integral part of this statement.
F-4
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (NOTE 2)
FOR THE PERIOD FROM INCEPTION (MAY 5, 2004)
THROUGH JUNE 30, 2004
Accumulated
Series A Accumulated (Deficit)
Preferred Stock Common Stock Additional Other During the
--------------------- --------------------- Paid-in Comprehensive Development
Description Shares Amount Shares Amount Capital (Loss) Stage Totals
- ---------------------------- --------- --------- --------- --------- --------- ------------- ----------- ---------
Balance - May 5, 2004 -- $ -- 1,535,000 $ 1,535 $ (1,535) $ -- $ -- $ --
Preferred and common stock
issued for reverse merger
with FNE Australia 1,000,000 1,000 4,500,000 4,500 342,100 -- -- 347,600
Common stock issued for cash -- -- 230,000 230 114,770 -- -- 115,000
Stock compensation expense
for options issued -- -- -- -- 12,800 -- -- 12,800
Australian currency
translation -- -- -- -- -- (1,068) -- (1,068)
Net (loss) for the period -- -- -- -- -- -- (106,864) (106,864)
--------- --------- --------- --------- --------- ------------- ----------- ---------
Balance - June 30, 2004 1,000,000 $ 1,000 6,265,000 $ 6,265 $ 468,135 $ (1,068) $ (106,864) $ 367,468
========= ========= ========= ========= ========= ============= =========== =========
The accompanying notes to financial statements are
an integral part of this statement.
F-5
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS (NOTE 2)
FOR THE PERIOD FROM INCEPTION (MAY 5, 2004)
THROUGH JUNE 30, 2004
Cumulative
From
2004 Inception
------------ ------------
Operating Activities:
Net (loss) $ (106,864) $ (106,864)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Stock compensation expense 12,800 12,800
Unrealized foreign exchange loss (1,068) (1,068)
Changes in net assets and liabilities-
Prepaid expenses and other assets (19,868) (19,868)
------------ ------------
Net Cash (Used in) Operating Activities (115,000) (115,000)
------------ ------------
Financing Activities:
Proceeds from sale of common stock 115,000 115,000
------------ ------------
Net Cash Provided by Financing Activities 115,000 115,000
------------ ------------
Net Increase (Decrease) in Cash -- --
Cash - Beginning of Period -- --
------------ ------------
Cash - End of Period $ -- $ --
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
============ ============
Income taxes $ -- $ --
============ ============
During the period the Company acquired entertainment products in
development in the amount of $347,600 for the issuance of 1,000,000 shares
of Series A Preferred stock and 4,500,000 shares of Common stock,
respectively.
The accompanying notes to financial statements are
an integral part of this statement.
F-6
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(1) Summary of Significant Accounting Policies
Basis of Presentation and Organization
Friday Night Entertainment Corporation ("FNE" or the "Company") is a Nevada
corporation in the development stage of producing motion picture films for
theatrical release and distribution. The accompanying financial statements of
FNE were prepared from the accounts of the Company under the accrual basis of
accounting in United States dollars. In addition, the accompanying financial
statements reflect the completion of a reverse merger between Friday Night
Entertainment Corporation and Friday Night Entertainment (Australia) Pty Ltd.
("FNE Australia"), which was effected on June 10, 2004.
Prior to the completion of the reverse merger, FNE (formerly Lunettes, Et Al,
Inc.) was a dormant corporation with no assets or operations (essentially since
its incorporation date of July 31, 2001). FNE Australia was organized as an
Australian private company on May 5, 2004, and subsequently acquired four film
scripts in exchange for common stock in June 2004. Given that FNE Australia is
considered to have acquired the FNE by a reverse merger through an Exchange
Agreement (see Note 4) and currently has voting control of FNE, the accompanying
financial statements present the financial position as of June 30, 2004, and the
operations for the period from the inception date (May 5, 2004) through June 30,
2004 of FNE Australia under the name of FNE. The reverse merger has been
recorded as a recapitalization of the Company, with the net assets of FNE
Australia and the Company brought forward at their historical bases. The costs
associated with the reverse merger have been expensed as incurred.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company is in the development stage and has yet to realize any revenues.
However, the Company is in the business of producing motion picture films for
theatrical release and distribution. As such, it will realize revenues from the
theatrical distribution of motion pictures when such motion pictures are
exhibited under variable fee arrangements, or when all terms of specific
licensing and distribution agreements have been met.
F-7
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
Film Production and Development Costs
The Company accounts for motion picture film production and development costs
under Statement of Position 00-2, Accounting by Producers or Distributors of
Films. The Company capitalizes and amortizes film production and development
costs using the individual film forecast method. Film production and development
costs are amortized to expense in the proportion that the exhibition revenues
recognized during the year bear to management's estimate of the total revenues
expected over the life of the production.
If film scripts under development have not been set for production within 3
years, the costs associated with such items are written off to expense.
When an event or change in circumstances indicates that the unamortized cost of
a film production exceeds the net recoverable amount, the carrying value of the
production is written down to its net recoverable value. The fair value of each
film production is determined by management on a title-by-title basis using
future revenue estimates and a discounted cash flow approach.
Impairment of Long-lived Assets
The Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date. The Company records an
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed.
Loss Per Common Share
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.
Comprehensive Income (Loss)
The Company presents comprehensive income (loss) in accordance with SFAS No.
130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income (loss) be reported in the financial
statements. For the period ended June 30, 2004, the only components of
comprehensive (loss) are the net (loss) for the period, and the foreign currency
translation adjustment.
Income Taxes
The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax asset and liabilities
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
F-8
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon potential likelihood of
realizing the deferred tax asset and taking into consideration the Company's
current financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
Foreign Currency Translation
The Company accounts for foreign currency translation pursuant to SFAS No. 52,
Foreign Currency Translation. The Company's functional currency is the
Australian dollar. All assets and liabilities are translated into United States
dollars using the current exchange rate. Revenues and expenses are translated
using the average exchange rates prevailing throughout the year. Translation
adjustments are included in other comprehensive income or loss for the period.
Fair Value of Financial Instruments
The Company has estimated the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of June 30, 2004, the Company did not have any financial
instruments requiring the estimate of fair value.
Stock-Based Compensation
The Company uses the fair value method to account for non-employee stock-based
compensation in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, and FASB Emerging Issues Task Force, or EITF, Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. Under the fair
value method, all transactions in which goods or services are the consideration
received for the issuance of equity instruments shall be accounted for based on
the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
F-9
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
The Company also uses the fair value method to account for compensation costs
for employee stock awards. Under the fair value method, compensation costs for
employee stock awards is recognized as the excess, if any, of the deemed fair
value for financial reporting purposes of the Company's common stock on the date
of grant over the amount an employee must pay to acquire the stock. Compensation
cost is amortized over the vesting period using an accelerated graded method in
accordance with SFAS Interpretation No. 28, Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans.
Concentration of Credit Risk
The Company has adopted SFAS No. 105, Disclosure of Information About Financial
Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentration of Credit Risk ("SFAS 105"). Under SFAS 105, the Company is
required to disclose any significant off-balance sheet risks and credit risk
concentrations. As of June 30, 2004, the Company did not have any material
off-balance sheet risks or credit concentrations.
Estimates
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of June 30, 2004, and expenses for the period from inception (May
5, 2004) through the period then ended. Actual results could differ from those
estimates made by management.
(2) Development Stage Activities and Going Concern
The Company is a motion picture film development and distribution company in the
development stage. As of June 30, 2004, the Company had completed organization
and reverse merger transactions, the acquisition of four motion picture scripts
from a member of the Board of Directors, the formation of a management team, and
other activities related to capital formation and initial operations. Management
of the Company is pursuing various sources of equity financing, and plans to
raise approximately $5.0 million through a best efforts self-underwritten public
offering of its common stock. The public offering and sale of common stock by
officers and directors of the Company will be conducted subsequent to the filing
and approval of a Registration Statement on Form SB-2 with the Securities and
Exchange Commission ("SEC"). The proceeds from the public offering will be used
by the Company for the development and production of the four movie scripts
provided by FNE Australia in the reverse merger. The Company also intends to use
proceeds from the public offering in order to acquire an option to develop a
motion picture to be called "Asphalt Beach," acquire additional motion picture
film scripts, and provide working capital for its operations.
F-10
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
While management of the Company believes that the Company will be successful in
its capital formation and operating activities, there can be no assurance that
the Company will be able to raise $5.0 million in equity capital through its
planned filing with the SEC and related activities, or be successful in the
production, development or distribution of motion pictures that will generate
sufficient revenues to sustain the operations of the Company.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which
contemplates continuation of the Company as a going concern. The Company has
incurred an operating loss since inception, and the working capital of the
Company is insufficient to meet its planned business objectives. These and other
factors raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
(3) Entertainment Products in Development
Entertainment products in development is comprised of four film scripts that
were acquired from a member of the Board of Directors of the Company at their
original cost of development of $347,600, in exchange for common shares of FNE
Australia. The scripts are in the development stage and are expected to be in
production within the next two years.
(4) Common Stock Transactions
Increase in Authorized Capital
On June 1, 2004, the Company amended its Articles of Incorporation to increase
the number of authorized common shares to 50,000,000, and to create 5,000,000
preferred shares. Each class of stock carries a par value of $0.001 per share.
The rights of the preferred shares are to be determined at the discretion of the
directors.
Designation of Preferred Shares
On June 2, 2004, the Board of Directors of the Company designated 1,000,000
shares of the Company's authorized stock as Series A preferred shares. The
Series "A" preferred shares are non-participating, but carry fifty (50) votes
per share at a general meeting of the stockholders. The remaining 4,000,000
preferred shares have not yet been designated.
F-11
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
Stock Exchange Agreement
On June 10, 2004, the Company entered into a definitive Share Exchange Agreement
(the "Exchange Agreement") with FNE Australia whereby the Company acquired all
of the issued and outstanding stock of FNE Australia in exchange for 4,500,000
shares of common stock and 1,000,000 shares of Series A preferred stock of the
Company. The shares of Series A preferred stock are non-participating, but each
share is entitled to fifty (50) votes in a general meeting of the stockholders.
As a result of the Exchange Agreement, FNE Australia controls 75 percent of the
Company, and has been deemed to have effected a reverse merger for financial
reporting purposes.
Issuances of Stock for Cash
On June 22, 2004, the Company issued 150,000 shares of its common stock for
$75,000 in cash to Banksia Entertainment Pty Ltd.
On June 29, 2004, the Company issued 80,000 shares of its common stock for
$40,000 in cash to Stuff & Bits `n Pieces Pty Ltd.
(4) Stock Options
On May 04, 2004, the Company issued 1,000,000 options to purchase common stock
to non-employees, with each option having the right to purchase one common share
at the greater of the market price less a discount of 40%, or $0.50. The options
vested immediately and expire on December 31, 2005.
The exercise price of the options granted to non-employees was below the fair
market value of the common stock on the date of the grant. The Company uses the
fair value method for stock-based compensation granted to non-employees in
accordance with SFAS 123. The fair value for these options was estimated at the
dates of grant using the Black-Scholes pricing model. The fair value of the
options granted to non-employees under this method is $0.0128 per option for a
total cost of $12,800. This amount has been expensed in the accompanying
statement of operations and comprehensive (loss).
The following assumptions are used for options granted: Zero dividend yield, 1%
volatility, risk-free interest rates of 1.57%, and expected lives of one year.
The assumptions are evaluated annually and revised as necessary to reflect
market conditions and additional experience.
(5) Income Taxes
The provision (benefit) for income taxes for the period ended June 30, 2004, was
as follows (using a 34 percent effective Federal income tax rate):
F-12
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
Current Tax Provision:
Federal
Taxable income $ --
----------
Total current tax provision $ --
==========
Deferred Tax Provision:
Federal
Stock compensation expense 952
Loss carryforwards 35,382
Change in valuation allowance (36,334)
----------
Total deferred tax provision $ --
==========
The Company had deferred income tax assets as of June 30, 2004, as follows:
Stock compensation expense 952
Loss carryforwards 35,382
Less - Valuation allowance (36,334)
----------
Total net deferred tax assets $ --
==========
As of June 30, 2004, the Company had net operating loss carryforwards for income
tax reporting purposes of approximately $107,000 that may be offset against
future taxable income. Current tax laws limit the amount of loss available to be
offset against future taxable income when a substantial change in ownership
occurs or a change in the nature of the business. Therefore, the amount
available to offset future taxable income may be limited. No tax benefit has
been reported in the financial statements for the realization of loss
carryforwards as the Company believes there is high probability that the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carry forwards are offset by a valuation allowance of the same amount.
(6) Related Party Transactions
In June 2004, a member of the Board of Directors of the Company transferred four
film scripts in exchange for common shares of FNE Australia. In accordance with
Staff Accounting Bulletin Topic 5G, Transfers of Nonmonetary Assets by Promoters
or Shareholders, this transaction was recorded at the stockholder's historical
cost basis, determined under accounting principles generally accepted in the
United States, in the amount of $347,600.
F-13
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(7) Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46 Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 ("FIN 46"). The FASB
issued a revised FIN 46 in December 2003, which modified and clarified various
aspects of the original interpretations. A Variable Interest Entity ("VIE") is
created when (i) the equity investment at risk is not sufficient to permit the
entity to finance its activities without additional subordinated financial
support from other parties or (ii) equity holders either (a) lack direct or
indirect ability to make decisions about the entity, (b) are not obligated to
absorb expected losses of the entity or (c) do not have the right to receive
expected residual returns of the entity if they occur. If an entity is deemed to
be a VIE, pursuant to FIN 46, an enterprise that absorbs a majority of the
expected losses of the VIE is considered the primary beneficiary and must
consolidate the VIE. For VIE's created before January 31, 2003, FIN 46 was
deferred to the end of the first interim or annual period ending after March 15,
2004. The adoption of FIN 46 did not have a material impact on the financial
position or results of operations of the Company.
In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity, ("SFAS 150"). This standard requires issuers to classify
as liabilities the following three types of freestanding financial instruments:
(1) mandatory redeemable financial instruments, (2) obligations to repurchase
the issuer's equity shares by transferring assets; and (3) certain obligations
to issue a variable number of shares. The Company adopted SFAS 150 in May 2004.
The adoption of SFAS 150 did not have a material impact on the financial
position or results of operations of the Company.
In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),
Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial
Statements. SAB 104's primary purpose is to rescind the accounting guidance
contained in SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21. The Company adopted the
provisions of SAB 104, and it did not have a material impact on the financial
position or results of operations of the Company.
(8) Commitments and Contingencies
On June 1, 2004, FNE entered into a consulting contract with an officer and
director of the Company to provide financial services up through November 30,
2004 for $20,000 per month.
F-14
FRIDAY NIGHT ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(9) Subsequent Events
On July 31, 2004, the Company issued 80,000 shares of common stock for $40,000
in cash to Banksia Entertainment Pty Ltd.
On October 31, 2004, the Company borrowed $125,000 from Waldwick Investments
Limited under the terms of a promissory note. The promissory note carries an
interest rate of four (4) percent per annum, and all interest and principal are
due and payable to Waldwick Investments Limited on October 31, 2009.
On November 3, 2004, the Company issued 50,000 shares of common stock for
$25,000 in cash to Andrew Banks & Associates Pty Ltd.
F-15
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Our Certificate of Incorporation and By-laws provide that we shall indemnify to
the fullest extent permitted by Nevada law any person whom we may indemnify
thereunder, including our directors, officers, employees and agents. Such
indemnification (other than as ordered by a court) shall be made by us only upon
a determination that indemnification is proper in the circumstances because the
individual met the applicable standard of conduct i.e., such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to our
best interest. Advances for such indemnification may be made pending such
determination. Such determination shall be made by a majority vote of a quorum
consisting of disinterested directors, or by independent legal counsel or by the
stockholders. In addition, our Certificate of Incorporation provides for the
elimination, to the extent permitted by Nevada, of personal liability of our
directors and our stockholders for monetary damages for breach of fiduciary duty
as directors.
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
Securities and Exchange
Commission registration fee $ 1,267
Legal fees and expenses (1) $25,000
Accounting fees and expenses (1) $25,000
Miscellaneous and Printing fees(1) $23,733
-------
Total (1) $75,000
(1) Estimated.
29
Item 26. Recent Sales of Unregistered Securities.
On June 10, 2004, we issued 4,500,000 shares of our common stock and issued
1,000,000 shares of our restricted Series "A" preferred shares, to Clam
Entertainment Pty Ltd., a corporation controlled by Cameron Lamb, our officer
and director, in consideration for all of the issued and outstanding stock of
Friday Night Entertainment Pty Ltd. The issuance was valued at $.06 per share or
$347,601 in the aggregate. Our shares were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Both entities were sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, both entities had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On June 22, 2004, we issued 150,000 common shares to Banksia Entertainment Pty
Ltd. in consideration for payment of $75,000. The issuance was valued at $.50
per share or $75,000 in the aggregate. Our shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Both entities were sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, both entities had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On June 29, 2004, we issued 80,000 common shares to Stuff and Bitsn' Pieces Pty
Ltd in consideration for payment of $40,000. The issuance was valued at $.50 per
share or $40,000 in the aggregate. Our shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Both entities were sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, both entities had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
30
On July 31, 2004, we issued 80,000 common shares to Banksia Entertainment Pty
Ltd. In consideration for payment of $40,000. The issuance was valued at $.50
per share or $40,000 in the aggregate. Our shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Both entities were sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, both entities had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On November 3, 2004, we issued 50,000 common shares to Andrew Banks & Associates
Pty. Ltd. in consideration for payment of $25,000. The issuance was valued at
$.50 per share or $25,000 in the aggregate. Our shares were issued in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933. No commissions were paid for the issuance of such shares. All of
the above issuances of shares of our common stock qualified for exemption under
Section 4(2) of the Securities Act of 1933 since the issuance of such shares by
us did not involve a public offering. Both entities were sophisticated investors
and had access to information normally provided in a prospectus regarding us.
The offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, both entities had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
Item 27. Exhibits.
3.1 Certificate of Incorporation and Amendments (1)
3.2 Bylaws (1)
5.1 Opinion and Consent of Anslow & Jaclin, LLP
10.1 Exchange Agreement dated June 10, 2004 between us and Friday Night
Entertainment Pty Ltd. (1)
10.2 Stock Option Agreement dated May 24, 2004 between us and Waldwick
Investments Limited (1)
10.3 Stock Option Agreement dated May 24, 2004 between us and Fort Street
Equity, Inc. (1)
16.1 SF Partnership, LLP Letter on Change in Certifying Accountant
21.1 Subsidiaries (1)
23.1 Consent of Davis Accounting Group P.C., independent auditors.
24.1 Power of Attorney (included on signature page of Registration Statement)
(1) Filed with the original SB-2 filing on August 17, 2004 (SEC File No.
333-118305)
31
Item 28. Undertakings.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii)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.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed 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.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 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 that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on the 9th day of November, 2004.
FRIDAY NIGHT ENTERTAINMENT CORPORATION
BY: /s/ CAMERON LAMB
--------------------------
CAMERON LAMB
Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned directors and officers of Friday Night Entertainment Corporation
hereby constitute and appoint Cameron Lamb, with full power to act without the
other and with full power of substitution and re-substitution, our true and
lawful attorneys-in-fact with full power to execute in our name and behalf in
the capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such attorneys-
in-fact, or any them, or their substitutes, shall lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ Cameron Lamb Chief Executive Officer November 9, 2004
- ----------------------- and Chairman of the Board
of Directors
/s/ Michael Costigan President and Director November 9, 2004
- -----------------------
/s/ Mark Pearson Chief Financial Officer November 9, 2004
- ----------------------- and Director
33