As filed with the Securities and Exchange Commission on June 13, 2001.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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MEDIABAY, INC.
(Exact name of registrant as specified in its charter)
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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 telephone number)
organization) number, including area code, of registrant's
principal executive offices)
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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
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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
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Common stock, no par value per share 16,863,301(3)(4) $.805 $13,574,957 $3,394
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(1) Includes 2,070,000 shares of common stock issuable upon exercise of
outstanding options and warrants and 14,793,301 shares of common stock
issuable upon conversion of convertible notes. 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 June 11, 2001.
(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.
(4) In addition, there are being registered hereunder an indeterminable number
of shares of common stock which may be issued by the registrant as payment
of interest on the convertible notes referred to in footnote (1) above.
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.
SUBJECT TO COMPLETION
DATED JUNE 13, 2001
MEDIABAY, INC.
16,863,301 Shares of Common Stock
This prospectus relates to up to 16,863,301 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 options and warrants made before any sale of any
of the shares of common stock being offered under this prospectus that are
underlying options and warrants.
The common stock is listed for trading on the Nasdaq National Market under
the symbol "MBAY". On June 11, 2000, the closing sale price of the common stock
as reported by the Nasdaq National Market was $0.73.
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 ______________, 2001.
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-KSB for the year ended December 31, 2000;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
and
(c) 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.
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).
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THE COMPANY
MediaBay, Inc. is a leading seller of spoken audio and nostalgia products,
including audiobooks and old-time radio shows, through direct response, retail
and Internet channels. Our content and products are sold in multiple formats,
including physical (cassette and compact disc) and secure digital download
formats.
Our content library consists of more than 50,000 hours of spoken audio
content including audiobooks, old-time radio shows, audio versions of
newspapers, magazines and other unique spoken word content. The majority of our
content is acquired under license from the rights holders enabling us to
manufacture the product giving us significantly better product margins than
other companies.
Our customer base includes over 2.55 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 5,000 retail locations,
including Costco, Target, Best Buy, Sam's Club, Barnes & Noble, Waldenbooks, B.
Dalton Booksellers, Borders, Amazon.com, Books-A-Million and The Museum Company.
Our web sites receive more than 2 million unique monthly web site visitors
and are among the most heavily trafficked bookselling web sites on the Internet.
We serve more than 300,000 classic radio and nostalgia video streams of our
content on a monthly basis to web site visitors at RadioSpirits.com and
MediaBay.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.
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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 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
$6.7 million during the year ended December 31, 1999 and $54.6 million during
the year ended December 31, 2000. As of March 31, 2001, we had an accumulated
deficit of $74.2 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 as follows:
o 25,000 shares at a price of $14.00 per share beginning on December 31,
2003;
o up to 230,000 shares at a price of $15.00 per share beginning on
December 31, 2004; and
o 50,000 shares at a price of $15.00 per share beginning on December 31,
2005.
If we were required to repurchase all 305,000 shares, it would cost us
approximately $4.6 million. We may not have sufficient funds to meet these
obligations to repurchase stock in the future.
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 and old time radio and classic
video programs has expanded rapidly in recent years. However, consumer interest
in audiobooks and old time radio and classic video programs 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 and classic video
programs 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, old time radio and classic video
industries. These changes include economic factors affecting discretionary
consumer spending, modifications in consumer demographics and the availability
of other forms of entertainment. The audiobook, old time radio and classic video
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;
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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.
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.
Since pricing patterns for the supply and sale of digital download of
spoken word content have not yet been established, we may not be able to buy
these products on the same terms as our existing products. Our profit margin for
these products also may not be as favorable as our profit margins for our
existing products.
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.
Our marketing strategy to acquire new members could result in increased
costs, and we may 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.
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
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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.
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 Audio Book Club 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 May 31, 2001, we owed approximately $12.0 million to trade and other
creditors. Approximately $5.3 million of these accounts payable were either past
due under the vendor's ordinary terms or more than 90 days old. 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% during each of
the years ended December 31, 1999 and 2000 and the three months ended March 31,
2001. 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.
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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 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 loss or unavailability of our key personnel could have a material
adverse effect on our business.
Our success depends largely on the efforts of Norton Herrick, our Chairman,
Michael Herrick, our Chief Executive Officer and President and Hakan Lindskog,
our Chief Operating Officer. Norton Herrick is actively involved in the
management and operation of several businesses and is required to devote only as
much time to our business and affairs as he deems necessary to perform his
duties. Norton Herrick may experience a conflict in the allocation of his time
among his various business ventures. The loss of the service of either of these
officers or of other key personnel could have a material adverse effect on our
business. We do not maintain key-man insurance on the lives of these officers or
any other key personnel.
Risks Related to the Internet and Technology
We may not be able to continue to license rights to sell spoken word
content in new formats, such as digital download of audio files, or to respond
rapidly to technological developments in the spoken word content industry.
If we are unable to adapt our content and our web sites to evolving
entertainment technologies and to continue to license the rights to sell spoken
word content in new and emerging formats, such as digital download of audio
files and enabling technologies, our product offerings may become obsolete and
consumers may purchase spoken word content elsewhere. Some of our arrangements
with audiobook publishers permit us to produce and sell audiobooks in a cassette
and CD format, and they may not permit us to adapt our licenses to new
technologies. Although we have the ability to offer secure digital download of
our spoken word content to personal computers, we believe that the introduction
by third parties of portable consumer electronic devices will be necessary for
broad consumer acceptance of digital download files. In addition, the technology
used in delivering spoken word content over the Internet may continue to evolve
rapidly.
Unauthorized duplication of our licensed content could affect our business.
Our attempts to ensure secure delivery of spoken word content to purchasers
over the Internet may not prevent the unauthorized replication of content that
we license for distribution. Unauthorized duplication of our content could
discourage content providers from entering into future licensing agreements with
us. If we permit unauthorized duplication of the content we sell, we could
become liable to content providers for
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substantial damages. Furthermore, we may be required to spend increasing amounts
of time and money to attempt to reduce possible unauthorized duplication of the
content we offer.
We may become subject to liability for taxes in connection with our
Internet sales.
We currently are not required to collect sales or other taxes on Internet
sales of content products in most states. Our business could be harmed if
additional sales or similar taxes are imposed on us or if jurisdictions in which
purchasers of our content reside require that we collect sales or similar taxes
when selling over the Internet. Significant tax requirements could increase our
costs associated with Internet sales. Additionally, increased costs associated
with taxes passed on to consumers could discourage consumers from making
purchases from us.
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 31.9% 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 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 May 31, 2001, we had approximately $6.6 million of debt outstanding
under our revolving line of credit and $12.5 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.
In addition, if an event of default occurs under the convertible promissory
notes or senior credit facility, the indebtedness could 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.
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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 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.
All of our shares of restricted 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 May 31, 2001, we have outstanding approximately 13,861,866 shares of
common stock. Approximately 8,600,000 of our shares are currently freely trading
without restriction under the Securities Act of 1933. All of the remaining
shares have been registered for resale or have been held by their holders for
over two years and are eligible for sale under Rule 144(e).
The sale of a significant number of shares of common stock following the
closing of this offering could adversely affect the market price of our common
stock. 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.
There are currently outstanding options and warrants and other convertible
securities to purchase approximately 25.0 million shares of common stock at a
weighted average price of $2.71 per share. All of these shares have been
registered for resale or are being registered for sale under this prospectus,
and may be sold in the public market by their holders upon exercise. To the
extent they are exercised or converted, your percentage ownership will be
further diluted and our stock price could be further adversely affected. This
could also adversely affect the terms upon which we will be able to obtain
additional equity capital, since the holders of outstanding options and warrants
can be expected to exercise them at a time when we would, in all likelihood, be
able to obtain any needed capital on terms more favorable to us than those
provided in the outstanding options and warrants.
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-
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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. We have agreed to
bear the expenses in connection with the registration of the common stock being
offered hereby by the selling shareholders.
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. As of May 31,
2001, there were 13,861,866 shares of common stock outstanding and no shares of
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
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.
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 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.
10
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 May 31, 2001, with respect
to the shareholders for which shares are being registered for sale.
Beneficial Ownership of Shares Beneficially % of Shares
Shares of Common Owned Assuming the Beneficially Owned
Shareholders for Which Shares Stock, including Shares Shares Registered Sale of the Shares Assuming the Sale of
are Being Registered for Sale Registered for Sale for Sale Registered the Shares Registered
----------------------------- ------------------- -------- ---------- ---------------------
Norton Herrick 15,482,520 3,543,303 4,396,361 25.2%
Huntingdon Corporation 7,542,856 7,542,856 0 0%
Evan Herrick 5,802,222 5,357,142 445,080 3.1%
HMA Enterprises, Inc. 300,000 300,000 0 0%
TDG Partners, Ltd. 100,000 100,000 0 0%
Dennis Levin 51,250 20,000 31,250 *%
----------
* Less than 1%
It is the current intent of Norton Herrick, Huntingdon Corporation and Evan
Herrick to pledge the shares as collateral for a loan. See "Plan of
Distribution."
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
President and a director of MediaBay.
The shares beneficially owned by Norton Herrick represent (a) 44,200 shares
of common stock, (b) 488,460 shares of common stock held by Howard Herrick, (c)
2,500,000 shares of common stock issuable upon exercise of options, (d) the
3,543,303 shares of common stock issuable upon conversion of a convertible
promissory note 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., (g) 150,000 shares of common
stock issuable upon exercise of options held by Evan Herrick and (h) the shares
individually owned by Huntingdon described below. Evan Herrick has granted to
Norton Herrick sole voting and dispositve power with respect to the 150,000
shares issuable upon exercise of options referred to in clause (e) above. The
shares beneficially owned by Norton Herrick do not include the 2,964,180 shares
held by Norton Herrick Irrevocable ABC Trust or 46,299 shares of common stock
issuable upon exercise of warrants that may be issuable to Mr. Herrick upon the
occurrence of specified events.
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The shares beneficially owned by Huntingdon Corporation represent (a)
5,892,856 shares of common stock issuable upon conversion of convertible
promissory notes and (b) 1,650,000 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 5,357,142
shares of common stock issuable upon conversion of a convertible promissory note
which are being registered for resale, (b) 145,080 shares of common stock and
(c) 300,000 shares of common stock issuable upon exercise of options.
The shares beneficially owned by Dennis Levin represent (a) 13,750 shares
of common stock, (b) the 20,000 shares of common stock issuable upon exercise of
options which are being registered for sale and (c) 15,000 shares of common
stock issuable upon exercise of options.
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.
12
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 of MediaBay, Inc. (formerly Audio Book Club, Inc.)
and the related financial statement schedule incorporated in this prospectus by
reference from MediaBay, Inc.'s Annual Report on Form 10-KSB for the year ended
December 31, 2000 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, and at its regional offices: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center,
13
13th Floor, New York, New York 10048. You can obtain copies of these materials
at prescribed rates from the Public Reference Room of the SEC 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).
14
================================================================================
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...................................... 10
Description of Capital Stock......................... 10
Shareholders for Which Shares
are Being Registered for Sale...................... 11
Plan of Distribution................................. 12
Indemnification...................................... 13
Legal Matters........................................ 13
Experts.............................................. 13
Where You Can Find Information....................... 13
================================================================================
================================================================================
16,863,301 Shares
of
Common Stock
MEDIABAY, INC.
-------------
PROSPECTUS
-------------
___________________ , 2000
================================================================================
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............................................... $ 3,394.00
Legal fees and expenses............................................ 5,000.00
Accounting fees and expenses....................................... 5,000.00
Miscellaneous .................................................... 1,606.00
----------
Total...................................................... $15,000.00
==========
----------
* 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.
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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
II-2
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.
(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 11th day of June 2001.
MEDIABAY, INC.
By: /s/ Michael Herrick
----------------------------------------
Michael Herrick, Chief Executive Officer
Each person whose signature appears below hereby authorizes each of Norton
Herrick and Michael Herrick 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 June 11, 2001
--------------------------
Norton Herrick
/s/ Michael Herrick Director, Chief Executive Officer and President June 11, 2001
-------------------------- (Principal Executive Officer)
Michael Herrick
/s/ Howard Herrick Director and Executive Vice June 11, 2001
-------------------------- President
Howard Herrick
/s/ John Levy Executive Vice President and Chief June 11, 2001
-------------------------- Financial Officer (Principal Financial
John Levy and Accounting Officer)
/s/ Carl Amari Director June 11, 2001
--------------------------
Carl Amari
/s/ Roy Abrams Director June 11, 2001
--------------------------
Roy Abrams
/s/ Paul Ehrlich Director June 11, 2001
--------------------------
Paul Ehrlich
/s/ Carl Wolf Director June 11, 2001
--------------------------
Carl Wolf
II-4