As filed with the Securities and Exchange Commission on December 13, 2002
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
MEDIABAY, INC.
(Exact name of registrant as specified in its charter)
---------------
Florida 2 Ridgedale Avenue - Suite 300 65-0429858
(State or other Cedar Knolls, New Jersey 07927 (IRS employer
jurisdiction of (973) 539-9528 identification
incorporation or (Address, including zip code, and number)
organization) telephone number, including area code,
of registrant's principal executive offices)
------------------
Michael Herrick
Chief Executive Officer
MediaBay, Inc.
2 Ridgedale Avenue - Suite 300
Cedar Knolls, New Jersey 07927
(973) 539-9528
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
Copy to:
Robert J. Mittman, Esq.
Brad L. Shiffman, Esq.
Blank Rome Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5000
Facsimile: (212) 885-5001
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
Proposed
Maximum Proposed
Title of each Amount Offering Maximum Amount of
Class of Securities To be Price Per Aggregate Registration
to be Registered Registered(1) Security(2) Offering Price(2) Fee
--------------------------------------------------------------------------------------------------------------------
Common stock, no par value per share 18,225,499(3) $.885 $16,129,567 $1,484
--------------------------------------------------------------------------------------------------------------------
(1) Includes 2,302,500 shares of common stock issuable upon exercise of
outstanding warrants, 11,458,741 shares of common stock issuable upon
conversion of convertible notes and 4,464,258 shares of common stock
issuable upon conversion of preferred stock. All of the shares of common
stock being registered hereby are being offered for the accounts of
selling shareholders who acquired such shares or options or warrants to
acquire shares in private transactions. Except as set forth in the
footnotes below, no other shares of the registrant's common stock are
being registered pursuant to this offering.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, based upon the
average of the high and low sales prices of the common stock as reported
on the Nasdaq National Market on December 10, 2002.
(3) Pursuant to Rule 416 of the Securities Act of 1933, there are also being
registered hereunder additional shares of common stock as may be issued to
the selling shareholders because of any future stock dividends, stock
distributions, stock splits, similar capital readjustments or other
anti-dilution adjustments.
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 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. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
DATED DECEMBER 13, 2002
MEDIABAY, INC.
18,225,499 Shares of Common Stock
This prospectus relates to up to 18,225,499 shares of the common stock of
MediaBay, Inc., which have been registered for resale by some of our
shareholders pursuant to this prospectus.
The common stock may be offered from time to time by the selling
shareholders through ordinary brokerage transactions in the over-the-counter
markets, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices and in other ways as described in the
"Plan of Distribution." MediaBay will not receive any of the proceeds from any
sale of common stock by the selling shareholders. MediaBay will receive proceeds
from any exercise for cash of warrants made before any sale of any of the shares
of common stock being offered under this prospectus that are underlying
warrants.
The common stock is listed for trading on the Nasdaq National Market under
the symbol "MBAY". On December 11, 2002, the closing sale price of the common
stock as reported by the Nasdaq National Market was $1.20.
An investment in the common stock is speculative and involves a high
degree of risk. See "Risk Factors" beginning on Page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is ______________, 2002.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by MediaBay with the Securities
and Exchange Commission are incorporated herein by reference and shall be deemed
a part of this prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 2001;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2002;
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 2002;
(d) Quarterly Report on Form 10-Q for the quarter ended September 30, 2002;
(e) Current Report on Form 8-K dated October 1, 2002;
(f) The description of our common stock contained in our Registration
Statement on Form 8-A dated November 12, 1999, together with any amendment
or report filed with the SEC for the purpose of updating the description;
and
(g) All documents filed by MediaBay pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of the initial
registration statement and prior to the effectiveness of the registration
statement.
All documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, after the date of this prospectus and
before the termination of the offering of the securities hereby shall be deemed
to be incorporated by reference in this prospectus and to be a part of this
prospectus on the date of filing of the documents. Any statement incorporated in
this prospectus shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which also is, or is deemed to be,
incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus or the
registration statement of which it is a part.
This prospectus incorporates documents by reference with respect to
MediaBay that are not presented herein or delivered herewith. These documents
are available without charge to any person, including any beneficial owner of
our securities, to whom this prospectus is delivered, upon written or oral
request to Mr. John Levy, MediaBay, Inc., 2 Ridgedale Avenue - Suite 300, Cedar
Knolls, New Jersey 07927, telephone: (973) 539-9528.
MediaBay is subject to the informational requirements of the Exchange Act.
We file reports, proxy statements and other information with the SEC. These
reports and other information can be read and copied at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our electronic filings made through the SEC's electronic data
gathering, analysis and retrieval system are publicly available through the
SEC's worldwide web site (http://www.sec.gov).
2
THE COMPANY
MediaBay, Inc. is a leading media, marketing and publishing company
specializing in spoken audio content, whose businesses include direct response
and interactive marketing, retail product distribution, media publishing and
broadcasting.
MediaBay is comprised of four operating divisions, Audio Book Club, the
leading club for audiobooks, Radio Spirits, the leading seller of classic radio
programs, MediaBay.com, MediaBay's digital audio download service, and
RadioClassics, a leading distributor of classic radio content across multiple
broadcast platforms, including satellite and traditional radio.
Our content library consists of more than 60,000 classic radio programs,
3,500 film and television programs and thousands of audiobooks. The majority of
our content is acquired under exclusive licenses from the rights holders
enabling us to manufacture the product giving us significantly better product
margins than other companies.
Our customer base includes approximately 3.0 million spoken audio buyers
who have purchased via catalogs and direct mail marketing. We also currently
have an additional 2.2 million e-mail addresses of spoken audio buyers and
enthusiasts online. Our old-time radio products are sold in over 7,000 retail
locations, including Wal-Mart, Costco, Target, Sam's Club, Barnes & Noble,
Borders, Cracker Barrel and Amazon.com.
We were incorporated in Florida in August 1993 under the name Audio Book
Club, Inc. In October 1999, we changed our name to MediaBay, Inc. Our principal
executive offices are located at 2 Ridgedale Avenue - Suite 300, Cedar Knolls,
New Jersey 07927. Our telephone number is (973) 539-9528. Our principal Internet
addresses are MediaBay.com, RadioSpirits.com and Audiobookclub.com. Information
contained on these web sites and our other web sites is not deemed part of this
prospectus.
3
RISK FACTORS
Prospective investors should consider carefully the following risk factors
before purchasing any shares of the common stock offered hereby by the selling
shareholders.
Risks Related to our Operations
Our products are sold in a niche market that is still evolving and may
have limited future growth potential.
We believe that the market for audiobooks has expanded rapidly in recent
years. However, consumer interest in audiobooks and old time radio may decline
in the future, and growth trends in these markets may stagnate or decline. The
sale of audiobooks through mail order clubs and over the Internet are emerging
retail concepts, and audiobooks are still evolving as a niche market. As is
typically the case in an evolving industry, the ultimate level of demand and
market acceptance for our products is subject to a high degree of uncertainty. A
decline in the popularity of audiobooks and old time radio would limit our
future growth potential and negatively impact our future operating results.
We may be unable to anticipate changes in consumer preference for our
products and may lose sales opportunities.
Our success depends largely on our ability to anticipate and respond to a
variety of changes in the audiobook and old-time radio industries. These changes
include economic factors affecting discretionary consumer spending,
modifications in consumer demographics and the availability of other forms of
entertainment. The audiobook and old time radio markets are characterized by
changing consumer preferences, which could affect our ability to:
o plan for catalog offerings;
o introduce new titles;
o anticipate order lead time;
o accurately assess inventory requirements; and
o develop new product delivery methods.
Although we evaluate many factors and attempt to anticipate the popularity
and life cycle of audiobook titles, the ultimate level of demand for specific
titles is subject to a high level of uncertainty. Sales of audiobook titles
typically decline rapidly after the first few months following release. If sales
of specific titles decline more rapidly than we expect, we could be left with
excess inventory, which we might be forced to sell at reduced prices. If we fail
to anticipate and respond to factors affecting the audiobook industry in a
timely manner, we could lose significant amounts of capital or potential sales
opportunities.
We may experience system interruptions, which affect access to our
websites and our ability to sell products over the Internet.
Our future revenues may depend in part on the number of web site visitors
who join as Audio Book Club members and who make online purchases. The
satisfactory performance, reliability and availability of our web sites,
transaction-processing systems and network infrastructure are critical to our
ability to attract and retain visitors at our web sites. If we experience system
interruptions that prevent customers and potential customers from accessing our
web sites, consumer perception of our on-line business could be adversely
affected, and we could lose sales opportunities and visitor traffic.
4
We may not be able to license or produce desirable spoken word content,
which could reduce our revenues.
We could lose sales opportunities if we are unable to continue to obtain
the rights to additional audiobook libraries or selected audiobook titles. Many
of our license agreements with audiobook publishers are short-term,
non-exclusive agreements, typically one to three years in length, and some of
our agreements will expire over the next several months unless they are renewed.
We may not be able to renew existing license and supply arrangements for
audiobook publishers' libraries or enter into additional arrangements for the
supply of new audiobook titles.
If our third-party providers fail to perform their services properly, our
business and results of operations could be adversely affected.
Third-party providers conduct all of our Audio Book Club customer service
operations, process orders and collect payments for us. If these providers fail
to perform their services properly, Audio Book Club members could develop
negative perceptions of our business, collections of receivables could be
delayed and our operations might not function efficiently.
If our marketing strategy to acquire new members are not successful, our
costs would increase, and we will not acquire as many members as we anticipate,
which would inhibit our sales growth.
If our direct mail and other marketing strategies are not successful, our
per member acquisition costs may increase and we may acquire fewer new members
than anticipated. As a result, our operating results would be negatively
impacted and our sales growth would be inhibited.
The public may become less receptive to unsolicited direct mail campaigns.
The success of our direct mail campaigns is dependent on many factors
including the public's acceptance of direct mail solicitations. Events in the
Fall of 2001, including individuals contracting Anthrax through unsolicited
mail, could alter the public's acceptance of direct mail. Negative public
reception of direct mail solicitations will result in lower custom acquisitions
rates, higher customer acquisition costs and will negatively impact operating
results and sales growth.
Increased member attrition could negatively impact our future revenues and
operating results.
Increases in membership attrition above the rates we anticipate could
materially reduce our future revenues. We incur significant up front
expenditures in connection with acquiring new members. A member may not honor
his or her commitment, or we may choose to terminate a specific membership for
several reasons, including failure to pay for purchases, excessive returns or
cancelled orders. As a result, we may not be able to fully recoup our costs
associated with acquiring new members. In addition, once a member has satisfied
his or her initial commitment to purchase additional audiobooks at regular
prices, the member has no further commitment to make purchases.
The closing of retail stores, which carry our products, could negatively
impact our wholesales sales of these products.
If the recent trend of bankruptcy filings by major retailers continues,
the number of outlets for our old-time radio product will become limited. With
fewer chains and stores available as distribution outlets, competition for shelf
space will increase and our ability to sell our products could be impacted
negatively. Moreover, our wholesale sales could be negatively impacted if any of
our significant retail customers were to close a significant number of their
locations or otherwise discontinue selling our products.
5
If third parties obtain unauthorized access to our member and customer
databases and other proprietary information, we would lose the competitive
advantage they provide.
We believe that our member file and customer lists are valuable
proprietary resources, and we have expended significant amounts of capital in
acquiring these names. Our member and customer lists, trade secrets, trademarks
and other proprietary information have limited protection. Third parties may
copy or obtain unauthorized access to our member and customer databases and
other proprietary know-how, trade secrets, ideas and concepts.
Competitors could also independently develop or otherwise obtain access to
our proprietary information. In addition, we rent our lists for one-time use
only to third parties that do not compete with us. This practice subjects us to
the risk that these third parties may use our lists for unauthorized purposes,
including selling them to our competitors. Our confidentiality agreements with
our executive officers, employees, list managers and appropriate consultants and
service suppliers may not adequately protect our trade secrets. If our lists or
other proprietary information were to become generally available, we would lose
a significant competitive advantage.
If we are unable to pay our accounts payable in a timely manner, our
suppliers and service providers may refuse to supply us with products or provide
services to us.
At September 30, 2002, we owed approximately $17.4 million to trade and
other creditors. Approximately $4.3 million of these accounts payable were more
than 60 days past due. If we do not make satisfactory payments to our vendors
they may refuse to continue to provide us products or services on credit, which
could interrupt our supply of products or services.
Higher than anticipated product return rates could reduce our future
operating results.
We experienced a product return rate of approximately 26%, 24% and 25%
during the years ended December 31, 2000 and 2001 and nine months ended
September 30, 2002, respectively. If members and customers return products to us
in the future at higher rates than in the past or than we currently anticipate,
our net sales would be reduced and our operating results would be adversely
affected.
If we are unable to collect our receivables in a timely manner, it may
negatively impact our cash flow and our operating results.
We are subject to the risks associated with selling products on credit,
including delays in collection or uncollectibility of accounts receivable. If we
experience significant delays in collection or uncollectibility of accounts
receivable, our liquidity and working capital position could suffer and we could
be required to increase our allowance for doubtful accounts which would increase
our expenses.
Increases in costs of postage could negatively impact our operating
results.
We distribute millions of mailings each year, and postage is a significant
expense in the operation of our business. We do not pass on the costs of member
mailings and member solicitation packages. Even small increases in the cost of
postage multiplied by the millions of mailings we conduct would result in
increased expenses and would negatively impact our operating results.
We face significant competition from a wide variety of sources for the
sale of our products.
We compete with other web sites which offer similar entertainment products
or content, including digital download of spoken word content. New competitors,
including large companies, may elect to enter the markets for audiobooks and
spoken word content. We also compete for discretionary consumer spending with
mail order clubs and catalogs, other direct marketers and retailers that offer
products with similar
6
entertainment value as audiobooks and old time radio and classic video programs,
such as music on cassettes and compact discs, printed books, videos, and laser
and digital video discs. Many of these competitors are well-established
companies which have greater financial resources that enable them to better
withstand substantial price competition or downturns in the market for spoken
word content.
The audiobook and mail order industries are intensely competitive. We
compete with all other outlets through which audiobooks and other spoken word
content are offered, including:
o bookstores;
o audiobook stores which rent or sell only audiobooks;
o mail order companies that offer audiobooks for rental and sale
through catalogs; and
o retail establishments such as convenience stores, video rental
stores and wholesale clubs.
The market for digital download of spoken word content is uncertain, and
we may not be able to participate in this market effectively or at all.
Digital download of spoken word content from the Internet is a relatively
new method of distribution and its growth and market acceptance is uncertain.
Purchasing spoken word content over the Internet in digital download format
involves adjustments in general consumer purchasing patterns, and consumers may
not be willing to purchase spoken word content in digital download format. If we
invest significant amounts of money and effort in developing digital download
products which do not achieve widespread popularity, or if the market for
digital download of spoken word content does not evolve as we anticipate, we may
not be able to recover our investment.
Our announced strategy of pursuing acquisitions could negatively impact
our operating results.
While we have announced a strategy, which includes growing by acquisition,
we have not completed a major acquisition. The legal and professional costs
associated with pursuing acquisitions as well as the time commitment of senior
management could have a negative impact on our operating results. There can be
no assurance that we will realize the perceived benefits of the acquisition.
Risks Related to Our Financial Condition
We have a history of losses, are not currently profitable and may incur
future losses.
Since our inception, we have incurred significant losses. We had losses of
$4.8 million during the year ended December 31, 2001. As of September 30, 2002,
we had an accumulated deficit of $89.6 million.
We may not be able to meet our obligations to repurchase shares of our
common stock in the future.
We granted sellers in our acquisitions the right to sell back to us shares
of our common stock that we issued to them. Unless our common stock satisfies
specific price targets and/or trading volume requirements, these rights could
require us to purchase up to 305,000 shares in the future at a cost to us of
approximately $4.6 million. We may not have sufficient funds to meet these
obligations to repurchase stock in the future.
Risks Related to Our Capital Structure
The Herrick family exerts significant influence over shareholder matters.
Norton Herrick, Michael Herrick and Howard Herrick and their affiliates
own approximately 32.1% of our outstanding common stock. As significant
shareholders and directors, they are able generally to direct our affairs and
exert significant influence over matters which require director or shareholder
vote, including the
7
election of directors, amendments to our Articles of Incorporation or approval
of the dissolution, merger, or sale of MediaBay, our subsidiaries or
substantially all of our assets. This concentration of ownership by the Herrick
family could delay or prevent a change in our control, even when a change in
control might be in the best interests of other shareholders.
The terms of our debt impose restrictions on our business.
As of December 13, 2002, we had approximately $4.7 million of debt
outstanding under our revolving line of credit and $13.0 million principal
amount of debt outstanding under convertible promissory notes. Our line of
credit restricts our ability to raise financing for working capital purposes
because it requires us to use any proceeds from equity or debt financings, with
limited exceptions, to repay amounts outstanding under the credit agreement. In
addition to limiting our ability to incur additional indebtedness, our existing
indebtedness under our revolving line of credit limits or prohibits us from,
among other things:
o merging into or consolidating with another corporation;
o selling all or substantially all of our assets;
o declaring or paying cash dividends; or
o materially changing the nature of our business.
We have to make substantial payments on our debt during 2003 and 2004 and
may not have the funds to do so.
Our line of credit is due January 15, 2004, an additional $7.8 million is
due upon demand of the holders which may be made at various times following
repayment of the line of credit and an additional $3.2 million under convertible
promissory notes is due on December 31, 2004. Additionally, we are required to
make monthly payments of principal on the line of credit of $170,000 in January
2003, increasing to $180,000 in April 2003; $190,000 in July 2003 and $200,000
in October 2003. We might not have sufficient funds to repay the debt or obtain
other financing to replace the debt or obtain an extension of its maturity. In
addition, if an event of default occurs under the convertible promissory notes
or senior credit facility, the indebtedness would become due and payable.
Our ability to use our net operating losses may be limited in future
periods, which could increase our tax liability.
Under Section 382 of the Internal Revenue Code of 1986, utilization of
prior net operating losses is limited after an ownership change, as defined in
Section 382, to an annual amount equal to the value of the corporation's
outstanding stock immediately before the date of the ownership change multiplied
by the long-term tax exempt rate. The additional equity financing we obtained in
connection with recent financings has resulted in an ownership change and, thus,
may limit our use of prior net operating losses. In the event we achieve
profitable operations, any significant limitation on the utilization of net
operating losses would have the effect of increasing our tax liability and
reducing after tax net income and available cash reserves. We are unable to
determine the availability of net operating losses since this availability is
dependent upon profitable operations, which we have not achieved in prior
periods.
Our stock price has been and could continue to be extremely volatile.
The market price of our common stock has been subject to significant
fluctuations since our initial public offering in October 1997. The securities
markets have experienced, and are likely to experience in the future,
significant price and volume fluctuations which could adversely affect the
market price of our common stock without regard to our operating performance. In
addition, the trading price of our common stock could be subject to significant
fluctuations in response to:
o our ability to maintain listing of our common stock on NASDAQ;
8
o actual or anticipated variations in our quarterly operating results;
o announcements by us or other industry participants,
o factors affecting the market for spoken word content;
o changes in national or regional economic conditions;
o changes in securities analysts' estimates for us, our competitors'
or our industry or our failure to meet such analysts' expectations;
and
o general market conditions.
Substantially all of restricted shares of common stock are currently
eligible for sale and could be sold in the market in the near future, which
could depress our stock price.
As of December 13, 2002, we have outstanding approximately 14.3 million
shares of common stock. Substantially all of our shares are currently freely
trading without restriction under the Securities Act of 1933, having been
registered for resale or held by their holders for over 2 years and are eligible
for sale under Rule 144(e). There are currently outstanding options and warrants
and other convertible securities to purchase an amount of shares substantial to
the public float. Substantially all of these shares have been registered for
resale. To the extent they are exercised or converted, your percentage ownership
will be further diluted and our stock price could be further adversely affected.
Moreover, as the underlying shares are sold, the market price could drop
significantly if the holders of these restricted shares sell them or if the
market perceives that the holders intend to sell these shares.
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this prospectus constitute "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical facts included in this
prospectus, including, without limitation, statements regarding our future
financial position, business strategy, budgets, projected costs and plans and
objectives of our management for future operations, are forward-looking
statements. In addition, forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may," "will," "expect,"
"Intent," "estimate," "anticipate," "believe," or "continue" or the negative
there of or variations thereon or similar terminology. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, we
cannot assure you that such expectations will prove to be correct. These forward
looking statements involve certain known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any results, performances or achievements express
or implied by such forward-looking statements. Important factors that could
cause actual results to differ materially from our expectations, include,
without limitation, those discussed "the Risk Factors section" appearing
elsewhere in this prospectus. Undue reference should not be placed on these
forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to update any forward-looking statements.
USE OF PROCEEDS
We will not receive any proceeds from any sales of shares of common stock
made from time to time hereunder by the selling shareholders. Any proceeds we
receive from the exercise of warrants for cash will be used for working capital.
We have agreed to bear the expenses in connection with the registration of the
common stock being offered hereby by the selling shareholders.
MATERIAL CHANGES--ADOPTION OF NEW ACCOUNTING PRINCIPLE
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets",
we ceased amortization of goodwill as of January 1, 2002. We completed the
transitional impairment test, which did not result in an impairment loss.
Subsequent impairment tests will be performed in the fourth quarter of each year
in connection with the annual budgeting and planning process. We allocated total
goodwill, net of accumulated amortization of $1,518, of $9,879 to our Radio
Spirits division. The following table illustrates the impact of
9
adoption of the non-amortization provisions of FAS 142 on the fiscal years ended
December 31, 2001, 2000 and 1999:
(Unaudited; dollars in thousands, except per share data)
For the Years Ended December 31,
-------------------------------------
2001 2000 1999
---- ---- ----
Net loss:
Reported net loss before extraordinary item $ (4,850) $ (52,496) $ (6,707)
Goodwill amortization 1,629 2,545 507
-------------------------------------
Adjusted net loss before extraordinary item $ (3,221) $ (49,951) $ (6,200)
=====================================
Reported net loss $ (4,850) $ (54,648) $ (6,707)
Goodwill amortization 1,629 2,545 507
-------------------------------------
Adjusted net loss $ (3,221) $ (52,103) $ (6,200)
=====================================
Basic and diluted loss per common share:
Reported basic and diluted loss per common share
before extraordinary item $ (0.35) $ (4.13) $ (0.82)
Goodwill amortization 0.12 0.20 0.06
-------------------------------------
Adjusted diluted loss per common share
before extraordinary item $ (0.23) $ (3.93) $ (0.76)
=====================================
Reported basic and diluted loss per common share $ (0.35) $ (4.30) $ (0.82)
Goodwill amortization 0.12 0.20 0.06
-------------------------------------
Adjusted diluted loss per common share $ (0.23) $ (4.10) $ (0.76)
=====================================
DESCRIPTION OF CAPITAL STOCK
General
MediaBay is authorized to issue 150,000,000 shares of common stock, no par
value, and 5,000,000 shares of preferred stock, no par value, of which 75,000
shares are designated as Series A Convertible Preferred Stock. As of December
13, 2002, there were 14,252,352 shares of common stock outstanding and 25,000
shares of Series A Convertible Preferred Stock outstanding.
Common Stock
The holders of our common stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders, including the election of
directors, and, subject to preferences that may be applicable to any preferred
stock outstanding at the time, are entitled to receive ratably dividends, if
any, as may be declared from time to time by the board of directors out of funds
legally available therefor. In the event of liquidation or dissolution of
MediaBay, the holders of common stock are entitled to receive all assets
available for distribution to the shareholders after satisfaction of obligations
to creditors, subject to any preferential rights of any preferred stock then
outstanding. The holders of our common stock have no preemptive or other
subscription rights, and there are no conversion rights or redemption or sinking
fund provisions with respect to the common stock. All of the outstanding shares
of common stock are, and the shares of common stock offered hereby upon issuance
and sale will be, fully paid and non-assessable. The rights, preferences and
10
privileges of the holders of our common stock are subject to, and may be
adversely affected by, the right of the holders of any shares of preferred stock
which our board of directors may designate in the future.
Preferred Stock
Authorized but undesignated shares of preferred stock may be issued from
time to time in one or more series upon authorization by our board of directors.
Our board of directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and other rights,
preferences, privileges and restrictions applicable to each series of preferred
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes could
adversely affect the voting power of the holders of common stock and make it
more difficult for a third party to gain control of MediaBay prevent or
substantially delay a change of control, discourage bids for our common stock at
a premium or otherwise adversely affect the market price of our common stock.
Series A Convertible Preferred Stock
There are currently 25,000 shares of Series A Convertible Preferred Stock
outstanding. The stated value of the Series A Convertible Preferred Stock is
$100.00 per share.
Dividends. Dividends are payable on the Series A Convertible Preferred
Stock quarterly, in arrears, on each March 31, June 30, September 30 and
December 30 at an annual rate of $9.00 per share. Dividends are payable at the
holder's option in (i) additional shares of Series A Convertible Preferred Stock
(ii) shares of common stock or (iii) cash; provided that if the holder elects to
receive a dividend payment in cash, the payment will accrue until MediaBay is
permitted to be made under its under its existing credit facility.
Conversion. The Series A Convertible Preferred Stock is convertible, at
the option of the holder, into a number of shares of common stock equal to a
fraction, (i) the numerator of which is equal to the liquidation preference plus
accrued and unpaid dividends through the conversion date and (ii) the
denominator is the stock price which is currently $0.56, subject to adjustment.
Liquidation. In the event of a liquidation, dissolution or winding up of
MediaBay, the holders of Series A Convertible Preferred Stock shall be entitled
to receive out of the assets of MediaBay, a sum in cash equal to $100.00 per
share before any amounts are paid to the holders of MediaBay common stock.
Voting Rights. The holders of Series A Convertible Preferred Stock shall
have the number of votes equal to the number of shares of Series A Convertible
Preferred Stock held multiplied by a fraction, the numerator of which is the
liquidation preference and the denominator is $1.75, and shall vote together
with the holders of common stock as a single class on all matters submitted to
the stockholders for a vote. In addition, the affirmative vote of the holders of
a majority of the outstanding shares of Series A Convertible Preferred Stock is
required for, among other things, the creation, authorization or issuance of a
series or shares of preferred stock senior to, or on parity with, the Series A
Convertible Preferred Stock; a merger, consolidation or business combination in
which MediaBay is not the surviving entity and MediaBay's shareholders do not
hold a majority of the capital stock of the surviving entity; MediaBay to incur
or permit to exist indebtedness or liens; the declaration or payment of
dividends; redemption or retirement of any other capital stock; distributions to
shareholders; and certain sales, transfers and dispositions of assets.
Classified Board of Directors
Our by-laws divide our board of directors into three classes, serving
staggered three-year terms. The staggered terms of the classes of directors may
make it more difficult for a third party to gain control of our board or acquire
MediaBay and may discourage bids for our common stock at a premium. In addition,
our
11
Articles of Incorporation provide that shareholders may not call special
meetings of shareholders unless they represent at least 25% of our outstanding
voting shares of stock.
Transfer Agent
The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company, New York, New York.
SHAREHOLDERS FOR WHICH SHARES ARE BEING REGISTERED FOR SALE
The following table sets forth information as of December 13, 2002, with
respect to the shareholders for which shares are being registered for sale.
Beneficial Ownership of Shares Registered Shares Beneficially % of Shares
Shares of Common Stock, Owned Assuming the Beneficially Owned
Shareholders for Which Shares are including Shares Shares Registered Sale of the Shares Assuming the Sale of
Being Registered for Sale Registered for Sale for Sale Registered the Shares Registered
------------------------- ------------------- -------- ---------- ---------------------
Norton Herrick 17,562,245 3,543,303 4,693,861 26.1%
Huntingdon Corporation 9,325,081 9,325,081 0 0%
Evan Herrick 5,502,195 5,357,115 145,080 1.0%
-----------------
* Less than 1%
The above table assumes for calculating each shareholder's beneficial
percentage ownership that options, warrants and/or convertible securities that
are held by such shareholder (but not held by any other selling shareholder or
person) and are exercisable or convertible within 60 days from the date of this
prospectus have been exercised or converted.
Norton Herrick is our Chairman and a director of MediaBay and the
President and sole shareholder of Huntingdon Corporation. Evan Herrick is a son
of Norton Herrick and brother of Howard Herrick, our Executive Vice President
and a director of MediaBay, and Michael Herrick, our Chief Executive Officer and
a director of MediaBay.
The shares beneficially owned by Norton Herrick represent (a) 191,700
shares of common stock, (b) 488,460 shares of common stock held by Howard
Herrick, (c) 2,800,000 shares of common stock issuable upon exercise of options,
(d) the 3,543,303 shares issuable upon conversion of convertible promissory
notes which are being registered for resale, (e) 928,701 shares of common stock
issuable upon exercise of warrants, (f) 285,000 shares of common stock held by
M. Huddleston Enterprises, Inc. and (g) the shares individually owned by
Huntingdon described below. The shares beneficially owned by Norton Herrick do
not include the 2,964,180 shares held by Norton Herrick Irrevocable ABC Trust
and, except as set forth above, do not include shares held directly or
indirectly by his sons, Michael Herrick, Howard Herrick and Evan Herrick, or any
other family members.
The shares beneficially owned by Huntingdon Corporation represent (a)
7,022,581 shares of common stock issuable upon conversion of convertible
promissory notes and (b) 2,302,500 shares of common stock issuable upon exercise
of warrants, all of which are being registered for resale.
The shares beneficially owned by Evan Herrick represent (a) the 892,857
shares of common stock issuable upon conversion of a convertible promissory note
and 4,464,258 shares of common stock issuable upon conversion of preferred stock
which are being registered for resale, and (b) 145,080 shares of common
12
stock. The shares beneficially owned by Evan Herrick do not include shares held
directly or indirectly by Norton Herrick, Howard Herrick and Michael Herrick or
any other family member.
PLAN OF DISTRIBUTION
MediaBay is registering the shares on behalf of the selling shareholders.
As used herein, selling shareholders includes donees, transferees and pledgees
selling shares received from a named selling shareholder after the date of this
prospectus. We have agreed to bear the expenses in connection with the
registration of the shares offered and sold by the selling shareholders.
Brokerage commissions and similar selling expenses, if any, attributable to the
sale of shares will be borne by the selling shareholders. Sales of shares may be
effected by selling shareholders from time to time in one or more types of
transactions, which may include block transactions, on the Nasdaq National
Market, in the over-the-counter market, in negotiated transactions, or a
combination of these methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. These transactions may or may not involve brokers
or dealers. The selling shareholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The selling shareholders may effect transactions by selling shares
directly to purchasers, through agents designated from time to time, or to or
through broker-dealers, which may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions,
or commissions from the selling shareholders and/or the purchasers of shares for
whom broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The selling shareholders and any broker-dealers that act in connection
with the sale of shares of common stock might be deemed to be underwriters,
within the meaning of Section 2(a)(11) of the Securities Act, and any
commissions received by broker-dealers and any profit on the resale of the
shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. MediaBay has
agreed to indemnify some of the selling shareholders against certain
liabilities, including liabilities arising under the Securities Act. The selling
shareholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares of common stock
against certain liabilities, including liabilities arising under the Securities
Act.
Because selling shareholders may be deemed to be underwriters, within the
meaning of Section 2(a)(11) of the Securities Act, the selling shareholders will
be subject to the prospectus delivery requirements of the Securities Act, which
may include delivery through the facilities of the Nasdaq National Market
pursuant to Rule 153 under the Securities Act.
Selling shareholders also may resell all or a portion of the shares of
common stock in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of this rule.
13
INDEMNIFICATION
Our Articles of Incorporation and By-Laws provide that we shall indemnify
our directors and officers to the fullest extent permitted by the Florida
Business Corporation Act. The Florida Business Corporation Act provides that
none of our directors or officers shall be personally liable to us or our
shareholders for damages for breach of any duty owed to MediaBay or our
shareholders, except for liability for (i) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (ii) any
unlawful payment of a dividend or unlawful stock repurchase or redemption in
violation of the Florida Business Corporation Act, (iii) any transaction from
which the director received an improper personal benefit or (iv) a violation of
a criminal law.
We have entered into indemnification agreements with some of our
employees, officers and consultants. Under the terms of the indemnity
agreements, we have agreed to indemnify, to the fullest extent permitted under
applicable law, against any amounts which the employee, officer or consultant
may become legally obligated to pay in connection with any claim arising from or
out of the employee, officer or consultant acting, in connection with any
services performed by or on behalf of us and related expenses. Provided however,
that the employee, officer or consultant shall reimburse us for the amounts if
the individual is found, as finally judicially determined by a court of
competent jurisdiction, not to have been entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC this indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against these liabilities, other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person of us in the successful defense of any action, suit or proceeding is
asserted by the director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of the issue.
LEGAL MATTERS
The legality of the shares of common stock offered hereby was passed upon
for MediaBay, Inc. by Blank Rome Tenzer Greenblatt LLP, New York, New York.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from MediaBay, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 2001 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND INFORMATION
MediaBay has filed with the SEC, a Registration Statement with respect to
the securities offered by this prospectus. This prospectus, filed as part of
such Registration Statement, does not contain all of the information set forth
in, or annexed as exhibits to, the Registration Statement, portions of which
have been omitted in accordance with the rules and regulations of the SEC. For
further information with respect to MediaBay and this offering, reference is
made to the Registration Statement, including exhibits filed therewith, which
may be read and copied at the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You can obtain copies of these materials
at prescribed rates from the Public Reference Room of the SEC at 450 Fifth
14
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
electronic filings made through the SEC's electronic data gathering, analysis
and retrieval system are publicly available through the SEC's worldwide web site
(http://www.sec.gov).
15
We have not authorized any dealer, sales person or any other person to
give any information or to represent anything not contained in this prospectus.
You must not rely on any unauthorized information. This prospectus does not
offer to sell or buy any securities in any jurisdiction where it is unlawful.
TABLE OF CONTENTS
Page
----
Incorporation of Certain Documents
by Reference ............................................................ 2
The Company ............................................................... 3
Risk Factors .............................................................. 4
Special Information Regarding
Forward Looking Information ............................................. 9
Use of Proceeds ........................................................... 9
Material Changes-Adoption of New Accounting
Principle ............................................................... 9
Description of Capital Stock .............................................. 10
Shareholders for Which Shares
are Being Registered for Sale ........................................... 12
Plan of Distribution ...................................................... 13
Indemnification ........................................................... 14
Legal Matters ............................................................. 14
Experts ................................................................... 14
Where You Can Find Information ............................................ 14
18,225,499 Shares
of
Common Stock
MEDIABAY, INC.
-------------
PROSPECTUS
-------------
_______________ , 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*.
The following are the estimated expenses of the issuance and distribution
of the securities being registered, all of which will be paid by the Registrant:
SEC registration fee ............................................ $ 1,484.00
Legal fees and expenses ......................................... 10,000.00
Accounting fees and expenses .................................... 5,000.00
Miscellaneous ................................................... 3,516.00
----------
Total ........................................................... $25,000.00
==========
---------------------------
* All amounts are estimated except the first item.
Item 15. Indemnification of Directors and Officers.
The Florida Business Corporation Act (the "Florida Act") contain
provisions entitling the Registrant's directors and officers to indemnification
from judgments, settlements, penalties, fines, and reasonable expenses
(including attorney's fees) as the result of an action or proceeding in which
they may be involved by reason of having been a director or officer of the
Registrant. In its Articles of Incorporation, the Registrant has included a
provision that limits, to the fullest extent now or hereafter permitted by the
Florida Act, the personal liability of its directors to the Registrant or its
shareholders for monetary damages arising from a breach of their fiduciary
duties as directors. Under the Florida Act as currently in effect, this
provision limits a director's liability except where such director breaches a
duty. The Company's Articles of Incorporation and By-Laws provide that the
Company shall indemnify, and upon request shall advance expenses to, its
directors and officers to the fullest extent permitted by the Florida Act. The
Florida Act provides that no director or officer of the Company shall be
personally liable to the Company or its shareholders for damages for breach of
any duty owed to the Company or its shareholders, except for liability for (i)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (ii) any unlawful payment of a dividend or unlawful
stock repurchase or redemption in violation of the Florida Act, (iii) any
transaction from which the director received an improper personal benefit or
(iv) a violation of a criminal law. This provision does not prevent the
Registrant or its shareholders from seeking equitable remedies, such as
injunctive relief or rescission. If equitable remedies are found not to be
available to shareholders in any particular case, shareholders may not have any
effective remedy against actions taken by directors that constitute negligence
or gross negligence.
Our company has entered into indemnification agreements with certain
employees, officers and consultants. Pursuant to the terms of the indemnity
agreements, our company has agreed to indemnify, to the fullest extent permitted
under applicable law, against any amounts which the employee, officer or
consultant may become legally obligated to pay in connection with any claim
arising from or out of the employee, officer or consultant acting, in connection
with any services performed by or on behalf of our company and certain expenses
related thereto. Provided however, that the employee, officer or consultant
shall reimburse our company for such amounts if the such individual is found, as
finally judicially determined by a court of competent jurisdiction, not to have
been entitled to such indemnification.
II-1
Insofar as indemnification for liabilities arising under the Securities
Act of 1993, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to any charter
provision, by-law, contract, arrangement, statute or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
(the "Commission") such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
Item 16. Exhibits
(a) Exhibits
Exhibit Number Description
-------------- -----------
5 Opinion of Blank Rome Tenzer Greenblatt LLP as to the
legality of the securities being registered
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Blank Rome Tenzer Greenblatt LLP included in
opinion filed as Exhibit 5
24 Power of Attorney, included in the signature page of this
Registration Statement
----------
* Previously filed
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-2
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, in the Town of Cedar
Knolls, State of New Jersey, on the 12th day of December 2002.
MEDIABAY, INC.
By: /s/ John Levy
---------------------------------
John Levy, Executive Vice President and
Chief Financial Officer
Each person whose signature appears below hereby authorizes each of Norton
Herrick and John Levy or either of them as his true and lawful attorney-in-fact
with full power of substitution to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 was signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Norton Herrick Director and Chairman December 12, 2002
--------------------------------
Norton Herrick
/s/ Carl Wolf Director and Co-Chairman December 12, 2002
--------------------------------
Carl Wolf
/s/ Michael Herrick Director and Chief Executive Officer (Principal
-------------------------------- Executive Officer) December 12, 2002
Michael Herrick
/s/ Howard Herrick Director and Executive Vice President December 12, 2002
--------------------------------
Howard Herrick
Executive Vice President and Chief December 12, 2002
/s/ John Levy Financial Officer (Principal Financial
-------------------------------- and Accounting Officer)
John Levy
/s/ Roy Abrams Director December 12, 2002
--------------------------------
Roy Abrams
/s/ Paul Ehrlich Director December 12, 2002
--------------------------------
Paul Ehrlich
---------------------------
Joseph R. Rosetti
II-4