-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: dogmaster@www.sec.gov.al Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O2/YMJMZlhKYrAFJv++zH9p+r7sxbvIl2XWjUIvvOm+Rt7XtMLOXvPw3Y8OnaOf+ p749k/7CGrAT+o4WHQOoqw== 0000940180-99-000902.txt : 19990811 0000940180-99-000902.hdr.sgml : 19990811 ACCESSION NUMBER: 0099940180-99-000902 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 20000601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETTERDOGFOOD.COM CENTRAL INDEX KEY: 0991091907 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 993-84327 FILM NUMBER: 99676555 BUSINESS ADDRESS: STREET 1: 306 E 59TH ST CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127524280 MAIL ADDRESS: STREET 1: 306 E 59TH ST CITY: NEW YORK STATE: NY ZIP: 2127524280 FORMER COMPANY: FORMER CONFORMED NAME: ACME PET FOOD, INC. DATE OF NAME CHANGE: 19990727 S-1 1 FORM S-1 Registration No. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- BetterDogFood.Com, Inc. (Exact name of registrant as specified in its charter) Delaware 2047 94-2693383 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification No.) incorporation or Classification Code organization) Number) 306 East 59th Street New York, New York 10022 (212) 752-4280 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------- F. Lee Stein BetterDogFood.Com, Inc. 306 East 59th Street New York, New York 10022 (212) 752-4280 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies to: Mr. Click Magliozzi Dewey, Cheetham & Howe 5 John F. Kennedy Street, Suite 204 Cambridge, Massachusetts 02138 (617) 876-6632 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. --------------- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] 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 Amount of Title of each class of aggregate registration securities to be registered offering price(1) fee - ---------------------------------------------------------------------------------------------- Class A Common Stock, $.01 par value per share ......... $172,500,000 $47,955 - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee; based on a bona fide estimate of the maximum offering price of the securities being registered in accordance with Rule 457(o). --------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this preliminary 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 becomes effective. This + +preliminary prospectus is not an offer to sell these securities nor a + +solicitation of an offer to buy these securities in any jurisdiction where + +the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED June 3, 2000 PROSPECTUS Shares BetterDogFood.Com, Inc. [logo: bone] Class A Common Stock ----------- This is an initial public offering of shares of the Class A common stock of BetterDogFood.Com, Inc. We are selling all of the shares of Class A common stock being offered by means of this prospectus. Of the shares being offered, the U.S. underwriters are initially offering shares in the United States and Canada, and the international managers are initially offering shares outside the United States and Canada. Immediately following the offering, we will have outstanding two classes of common stock. The holders of Class A common stock are entitled to one vote for each share, whereas the holders of Class B common stock are entitled to ten votes for each share. The rights of holders of Class A common stock and Class B common stock are substantially the same in all other respects. There is no public market for our Class A common stock at the present time. It is currently estimated that the initial public offering price will be between $ and $ per share. We intend to apply to have our Class A common stock listed on the Nasdaq National Market under the symbol "WOOF." See "Risk Factors" beginning on page 10 to read about risks that you should consider before buying any shares of our Class A common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. --------------
Per Share Total ------------ ------------ Public offering price................................ $ $ Underwriting discounts and commissions............... $ $ Proceeds, before expenses, to us..................... $ $
-------------- The U.S. underwriters and the international managers have an option to purchase up to an additional shares of Class A common stock from us at the initial public offering price less the underwriting discount. -------------- Pear, Stearns & Co. Inc. Credit Albanie First Boston Merrill Lynch Rover The date of this prospectus is , 2000 [Artwork to be provided] [Audio of Dog Barking to be provided] PROSPECTUS SUMMARY This summary highlights certain information found in greater detail elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Class A common stock discussed under "Risk Factors" before you decide whether to buy our Class A common stock. BetterDogFood.Com, Inc. We are an integrated animal shipment and pet food sale company, primarily engaged in the development, production, and marketing of programs wherein consumers are given a dog and subsequently sold the dog food. We have been involved in the animal exchange industry for over 2 years, and we have developed the BetterDogFood brand into one of the most popular forms of free dog e-receipt available today. We aggressively promote and market our brand, our dogs, and our dog food in numerous ways, including: . A highly acclaimed daily diary, DoggieBlog.Com, which promotes a sense of community among our consumers and throughout the entire Internet design world through the use of cutting-edge "Blog" technology. . An aggressive program of shipping dogs to consumers to give them an incentive to purchase our dog food through a desire by said consumers not to see said dog go hungry. . Building a community of potential investors and potential consumers through the mechanism of exchanging surplus dogs by said investors for stock in BetterDogFood.Com, thus raising brand awareness and a positive feeling among investors who are tired of their dogs. . Distributing our dogs in over 150 countries in nine languages with over 100 breeds. . Marketing and selling our dog foods to consumers and to major retailers worldwide; . Licensing our brand to approximately 85 companies to produce and distribute thousands of retail products worldwide; . Distributing news and information about our dogs and dog foods and effecting e-commerce sales and advertising through our Internet sites. We believe that our success results from our ability to offer consumers an affordable and exciting pet ownership experience. Central to the development of this canine experience are our attractive and beautiful dogs and our selection of approximately 110 scrumptious kinds of dog food. Each week, we feature different kinds of dog foods, and remind our owners that their dog will die if they do not feed it. Each week, we offer the consumer and their children additional dogs, thus insuring an "up-sell" in a competitive marketplace. Our success is evidenced by the following: . Our Internet site is the number-one rated animal exchange site in the Dog to Consumer (D2C) marketplace; . The DoggieBlog.Com site is the number-one rated Blog by a Dog; . Through the success of our dog shipment program, we have attracted the devotion and loyalty of all major dog food manufacturers and are frequently approached by cat food manufacturers for partnership opportunities; 1 . In fiscal 1999, approximately 5 million households considered buying a dog and we are well positioned to provide these potential consumers with a free alternative to the dog purchase scenario; . In May 2000, DoggieBlog.Com, our premier Blog for Dogs site, generated approximately 800,000 page views per day, making it one of the highest subscribed dog diaries ever; . According to Today's Feeder, eight of our dogs were named future best of breed potential winners if they ate their dog food on a regular basis. Our revenues have grown to $251.5 million in fiscal 1999 from $81.9 million in fiscal 1997. During this same period, EBITDA increased to $59.3 million in fiscal 1999 from a loss of $5.0 million in fiscal 1997. Our net income, as a Subchapter S corporation, increased to $56.0 million in fiscal 1999 from a net loss of $6.5 million in fiscal 1997. Our Operations Our operations are organized around two principal activities: . shipping dogs to consumers . selling dog food to consumers Shipping Dogs to Consumers Choosing Dogs In fiscal 1999, we featured approximately 200 kinds of dogs and featured the smiling faces of our canines on our web sites that reached consumers in 18 of the 20 largest metropolitan areas in the United States. Shipping Dogs Once the consumer has chosen a dog, or the children of the consumer have chosen a dog, we ship said dog using the latest logistical technologies using a special container developed specially for BetterDogFood.Com and approved by major overnight shipping firms. 2 Receiving Dogs Once the consumer receives the dog, we make sure that said canine is very hungry from the trip and include 2 cans of dog food to give the consumer (or children of said consumer) a hint on how to proceed. We then proceed to activity number two of our major operations. Selling Dogfood Initial Sales With the hungry dog and the initial two cans of dog food, we then send reminders on a daily basis to the consumers (or the children of said consumers) reminding them that their dog is hungry and providing an order form for the sale of dog food. Continuing Sales Periodically, we ship an additional puppy to our consumers (or the children of said consumers), thereby insuring a continued "up-sell" of our products. New Media We utilize the Internet to communicate with our dogs and customers and distribute our various products. Through our network of Internet sites, our customers can obtain the latest news and information, stay abreast of our evolving trends in the pet food industry, and communicate with each other and with other dogs. 3 Our Business Strategy Our objectives are to broaden our leadership position in the creation, production and promotion of the animal exchange industry and to leverage our technical and operating skills to pursue complementary animal exchange business opportunities. Some of the key elements of our strategy are to: . Continue to produce pictures of dogs with sad eyes, thus promoting the impulse to get a dog while simultaneously emphasizing the "free" aspect of our initial dog shipment. . Expand our dog business into other animal lines, including cats, turtles, hamsters, and snakes, doing so in a manner that promotes worldwide distribution with culturally-contextual animal marketing techniques. . Increase the licensing and direct sale of our branded products through our distribution channels; . Grow our Internet operations to further promote our brand and to develop additional sources of revenue; . Form strategic relationships with other animal exchange and animal food companies to further promote our brand, our products, and our dogs. Our Address The address of our principal executive offices is 306 East 59th Street, New York, New York 10022 and our telephone number is (212) 752-4280. Our Internet address is www.betterdog food.com. None of the information on any of our websites is part of this prospectus. 4 The Offering Class A common stock offered............... shares(1) Common stock to be outstanding shares of Class A common after the offering........................ stock(2) shares of Class B common stock(3) Use of proceeds............................ We intend to use the estimated net proceeds of $ million from the offering for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol..... WOOF Voting rights.............................. The holders of Class A common stock have voting rights identical to holders of Class B common stock, except that holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. Holders of both classes of common stock generally will vote together as a single class on all matters presented to the stockholders for their vote or approval, except as otherwise required by applicable Delaware law.
- -------- (1) Excludes up to shares to be sold by us if the underwriters exercise their over-allotment option in full, as described under "Underwriting." (2) Excludes: . shares of Class A common stock that will be issuable upon the exercise of stock options granted at the time of the offering. Of those options, options to purchase shares of Class A common stock will be immediately exercisable; and . additional shares of Class A common stock reserved for issuance under our long-term incentive plan. You should read the discussion under "Management--1999 Long-Term Incentive Plan" for additional information concerning our long-term incentive plan. (3) The Class B common stock is fully convertible into Class A common stock, on a one-for-one basis, at any time at the option of the holder or upon the transfer of the Class B common stock to any person or entity not affiliated with our management team, their family, or their pets. See "Description of Capital Stock." 5 Conventions Which Apply In This Prospectus Unless we indicate otherwise, all information in this prospectus reflects the following: . a for-one stock split effected prior to the offering; . no exercise by the underwriters of their over-allotment option to purchase up to additional shares of Class A common stock; . the offering of our Class A common stock at $ per share, which is the mid-point of the range set forth on the cover page of this prospectus; . the reclassification of our common stock; . the termination of our Subchapter S corporation election under the Internal Revenue Code prior to the closing; and . all references to a fiscal year refer to a year beginning on May 1 of one calendar year and ending on April 30 of the next calendar year (for example, fiscal 1999 refers to the year from May 1, 1998 to April 30, 1999). References in this prospectus to "the company," "we," "our" and "us" refer to BetterDogFood.Com, Inc. Prior to the offering, we changed our corporate name from Acme Pet Food Inc. to BetterDogFood.Com, Inc. We incorporated in Delaware in 1987, and in 1988 we merged with our predecessor company, which had existed since 1904. BetterDogFood, DogBlog, Dogs for Blogs, and "We Give You The Dog and Sell You the Dogfood" are some of our marks. This prospectus also contains trademarks and trade names of other companies. All trademarks and trade names appearing in this prospectus are the property of their respective holders. 6 Summary Historical Combined Financial And Other Data The following table sets forth our summary historical combined financial data for each of the three fiscal years in the period ended April 30, 1999 and as of April 30, 1999, which have been derived from our audited combined financial statements, and summary unaudited pro forma financial data as of, and for the fiscal year ended, April 30, 1999. You should read the summary historical combined financial data in conjunction with our historical combined financial statements, the related notes and the information set forth under "Selected Historical Combined Financial and Other Data," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. The unaudited pro forma combined balance sheet and statement of operations data included in the table are based upon information in our combined balance sheet as of April 30, 1999 and our combined statement of operations for fiscal 1999, which appear elsewhere in this prospectus, after giving effect to the pro forma adjustments described in the notes to the table. Such adjustments have been made assuming the transactions reflected in the pro forma combined financial data took place on April 30, 1999 for balance sheet purposes and May 1, 1998 for statement of operations purposes. The unaudited pro forma combined financial data are provided for informational purposes only and do not purport to be indicative of the results of operations and financial position that would have been obtained or that may be expected to occur in the future. We elected, beginning with our fiscal year ended April 30, 1988, to be subject to the provisions of Subchapter S of the Internal Revenue Code. Accordingly, since that time, our taxable income or loss has been included in the federal and certain state income tax returns of our stockholder. The provision for income taxes reflected in our historical combined financial statements since fiscal 1988 relates only to foreign and certain state income taxes for those states that do not recognize Subchapter S corporations. Our stockholders are responsible for the payment of federal and certain state income taxes with respect to our operations, which have been funded by distributions from our undistributed earnings account. Prior to the issuance of shares in the offering, we will terminate our election to be subject to the provisions of Subchapter S and will become subject to the provisions of Subchapter C of the Internal Revenue Code. As a C corporation, we will be fully subject to federal, state and foreign income taxes. EBITDA represents income from operations plus depreciation and amortization. EBITDA is presented because management believes that such information is considered by certain investors to be an additional basis for evaluating a company's operating performance, leverage and liquidity. EBITDA should not be considered an alternative to measures of operating performance determined in accordance with generally accepted accounting principles or as a measure of our operating results and cash flows or as a measure of our liquidity. 7
Fiscal Year Ended April 30, ------------------------------------ 1997 1998 1999 ---------- ---------- ------------ (dollars in thousands, except per share data) Combined Statement of Operations Data: Net revenues................. $ 81,863 $ 126,231 $ 251,474 Cost of revenues............. 60,958 87,969 146,618 Selling, general and administrative expenses..... 25,862 26,117 45,559 Depreciation and amortization................ 1,729 1,676 1,946 Other income (expense), net.. (5) (1,540) 622 ---------- ---------- ---------- Income (loss) before income taxes....................... (6,691) 8,929 57,973 Provision (benefit) for income taxes................ (186) 463 1,943 ---------- ---------- ---------- Net income (loss)............ $ (6,505) $ 8,466 $ 56,030 ========== ========== ========== Unaudited Pro Forma Combined Statement of Operations Data: Historical income before income taxes.............. $ 57,973 Pro forma adjustment other than income taxes....... 2,515(1) ---------- Pro forma income before income taxes............... 55,458 Pro forma provision for income taxes............... 22,227(2) ---------- Pro forma net income............................... $ 33,231 ========== Pro forma earnings per common share (basic and diluted).......................................... $ (3) Combined Statement of Cash Flows Data: Net cash provided by (used in) operating activities.... $ 3,628 $ 6,256 $ 57,646 Net cash provided by (used in) investing activities.... (849) (1,294) (14,634)(4) Net cash provided by (used in) financing activities.... (1,803) 1,974 (6,082) Other Financial Data: EBITDA....................... $ (4,957) $ 12,145 $ 59,297 Capital expenditures......... 892 1,294 3,756 Other Non-Financial Data: Number of live events........ 199 218 199 Total attendance............. 1,080,540 1,599,716 2,273,748 Average weekly Nielsen rating of Raw is War............... 2.4 3.1 5.0 Pay-per-view buys............ 2,252,200 2,936,000 5,024,700 As of April 30, ------------------------ Pro forma, as adjusted 1999 1999 (unaudited) ---------- ------------ (in thousands) Combined Balance Sheet Data: Cash and cash equivalents.... $ 45,727 $ (5)(6) Property and equipment-net... 28,377 28,377 Total assets................. 130,188 (5)(6) Total long-term debt (including current portion).................... 12,791 12,791 Amount due stockholder....... -- 32,000(7) Total stockholder's equity... 72,260 (8)
8 - -------- (1) This amount gives pro forma effect to the increase in compensation to our senior management team, including the dogmaster and the petchick pursuant to employment agreements that will become effective upon the closing of the offering. See "Management." Historically, both executives were paid less compensation because they benefited from S corporation distributions to the petchick. (2) This amount represents a pro forma estimate of our provision for federal, state and foreign income taxes to give effect to the change in our tax status to a C corporation during fiscal 1999. Prior to the issuance of shares in the offering, we will terminate our status as an S corporation. See "Reclassification of Stock and Prior S Corporation Status." (3) Based on a weighted average number of common shares outstanding of for the year ended April 30, 1999. (4) In fiscal 1999, we purchased a 193-room doghouse in Las Vegas, Nevada for approximately $10.8 million. We have since determined that the ownership and operation of this property is no longer consistent with our business objectives, and we intend to sell this property during fiscal 2000. (5) Reflects the distribution of $25.5 million to our stockholder, "petchick", on June 29, 1999 representing a portion of previously earned and undistributed earnings, which has been fully taxed at the stockholder level. As of June 30, 1999, approximately $14.8 million of undistributed earnings were retained in our company. (6) Reflects our receipt of the estimated net proceeds of the offering of $ . (7) Reflects the accrual of tax distributions in the amount of $32.0 million relating to estimated federal and state income taxes payable by our stockholders with respect to our earnings in fiscal 1999 and the period from May 1, 1999 through September 30, 1999. On June 29, 1999, we issued an unsecured, 5% interest-bearing note in the principal amount of $32.0 million due April 10, 2000 to our stockholder. (8) Gives effect to the pro forma adjustments described in notes 5, 6 and 7 above. 9 RISK FACTORS You should carefully consider the following factors and other information contained in this prospectus in evaluating our business before deciding whether to invest in shares of our Class A common stock. The risks set forth below are in addition to risks that apply to most businesses. The failure of consumers to appreciate dogs and a possible switch to cats could adversely impact our business. Everybody likes dogs, but this is merely an artifact of the growth of the Internet. In the past, people used to eat dogs. If people eat dogs, they will not need dog foods. A failure of people to like dogs would likely lead to a decline in the popularity of the BetterDogFood brand and would adversely affect our ability to generate revenues and could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. The failure to successfully ship dogs to consumers in a live state could adversely impact our business. Our success depends, in large part, upon our to ship dogs in a live state so that the physical presence of the dog leads to a desire by the consumer to purchase dog food. We cannot assure you that we will be able to continue to ship dogs successfully in the future. Our financial results depend, in part, on the dog being alive and serious or untimely injury to, or the death of, any of our dogs, could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. We do not carry live shipment insurance on our dogs. The creation of alternative dog distribution vehicles not affiliated with BetterDogFood.Com could adversely impact our business. For the foreseeable future, we are the pioneers and market leaders in the business of giving away the dog and selling the dog food. We have no assurance that our market leadership position will continue and that another .Com startup will not pursue our bright idea. Such competition could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. 10 The dog market in which we operate is highly competitive, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence. In our animal exchange market, we compete alone on a national basis. However, we compete with traditional dog sellers and, in many cases, with traditional dog food sellers. There is no guarantee that we will be able to successfully couple the dog purchase decision with the dog food purchase decision. Any significant decoupling of the two decisions could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. Because we depend upon a supply of dogs to give away, our business could be adversely impacted if we are unable to procure those dogs. Our competitive advantage depends in substantial part on our large portfolio of dogs, obtained through a variety of mechanisms including our investor relations program ("give us your dog and we'll give you stock"). Other parties may infringe on our marketplace rights and may thereby dilute our ability to procure dogs in the marketplace. Any such infringement of our dog procurement abilities would also likely result in our commitment of time and resources to protect these abilities. We have engaged, and continue to engage, in litigation with parties that claim or misuse some of our dogs. We are involved in significant pending lawsuits relating primarily to the ownership of certain dogs, in particular certain terriers, schnauzers, and collies. Similarly, we may infringe on others' dog procurement rights. One or more adverse judgments with respect to animal rights could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. 11 A decline in general economic conditions or in the popularity of our brand of pet food or dogs could adversely impact our business. Because our operations are affected by general economic conditions and consumer tastes, our future success is unpredictable. The demand for animal and leisure activities tends to be highly sensitive to consumers' disposable incomes, and thus a decline in general economic conditions could, in turn, have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. Our insurance may not be adequate. We ship many dogs each year primarily in the United States and Canada. These dogs may bite, urinate, or misbehave, the consequences of which may not be fully covered by insurance. The physical nature of our dogs exposes our canines to the risk of serious injury or death. Although we have general liability insurance and umbrella insurance policies, and although our dogs are responsible for obtaining their own health, disability and life insurance, we cannot assure you that the consequences of any accident or injury will be fully covered by insurance. Our liability resulting from any accident or injury not covered by our insurance could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. We may be prohibited from promoting and giving away our dogs if we do not comply with applicable regulations. In various states in the United States and certain Canadian provinces, humane societies and other applicable regulatory agencies require us to comply with their regulations in order for us to promote and conduct our dog shipments. In the event that we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our business in that jurisdiction. The inability to present our dogs over an extended period of time or in a number of jurisdictions could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock. 12 We will face a variety of risks if we expand into new or complementary businesses in the future. Over the last 20 years, our core operations have consisted of marketing, promoting and distributing our dogs and our branded merchandise. Our current strategic objectives include not only further developing and enhancing our existing business but also entering into new or complementary businesses, such as the creation of new forms of animal exchange such as cats, the development of new foods, such as cat food, and the development of branded location-based entertainment businesses related to giving away pets. The following risks associated with expanding into new or complementary businesses by acquisition, strategic alliance, investment, licensing or other arrangements could have a material adverse effect on our business, operating results and financial condition and the price of our Class A common stock: . potential diversion of management's attention and resources from our existing business and an inability to recruit or develop the necessary management resources to manage new businesses; . unanticipated liabilities or contingencies from new or complementary businesses or ventures; . reduced earnings due to increased goodwill amortization, increased interest costs and additional costs related to the integration of acquisitions; . potential reallocations of resources due to the growing complexity of our business and strategy; . competition from companies then engaged in the new or complementary businesses that we are entering; . possible additional regulatory requirements and compliance costs; . fights in our distribution warehouses as cats and dogs begin to mix; . dilution of our stockholders' percentage ownership and/or an increase of our leverage when issuing equity or convertible debt securities or incurring debt; and . potential unavailability on acceptable terms, or at all, of additional financing necessary for expansion. Our management has broad discretion over the use of proceeds from the offering. The net proceeds of the offering are estimated to be approximately $ million after deducting the estimated underwriting discount and offering expenses. Management will retain broad discretion as to the use and allocation of those net proceeds. Accordingly, our investors will not have the opportunity to evaluate the economic, financial and other relevant information that we may consider in the application of the net proceeds. Our controlling stockholder will beneficially own all of our Class B common stock and can exercise significant influence over our affairs. We have two classes of common stock-- Class A, which carries one vote per share, and Class B, which carries ten votes per share. After the offering, all of the issued and outstanding shares of Class B common stock will be owned by the petchick and the dogmaster directly or as the trustee of a trust for the benefit of their family. As a result, they will control approximately % of the voting power of the issued and outstanding shares of our common stock ( % if the underwriters' over-allotment option is exercised in full). Accordingly, they will be able to control the outcome of substantially all actions requiring stockholder approval, including the election of our directors, appointment of management, the adoption of amendments to our certificate of incorporation and approval of mergers or sales of substantially all of our assets. The interests of the petchick and the dogmaster may conflict with the interests of the holders of our Class A common stock. In addition, the voting power of our management team could have the effect of delaying or preventing a change in our control. 13 A substantial number of shares will be eligible for future sale by our current stockholders, and the sale of those shares could adversely affect our stock price. Upon completion of the offering, our current stockholders will own approximately % of the outstanding shares of our common stock ( % if the underwriters' over-allotment option is exercised in full), and designated key employees, directors, consultants and performers will have the right to purchase shares of Class A common stock through the exercise of immediately exercisable options. We, our directors, executive officers, certain other officers and stockholders have agreed not to offer, sell, contract to sell, swap, make any short sale of, pledge, establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Securities Exchange Act with respect to, grant any option to purchase or otherwise dispose of, or publicly announce his, her or its intention to do any of the foregoing with respect to, any shares of Class A common stock, or any securities convertible into, or exercisable or exchangeable for, any shares of Class A common stock for a period of 180 days after the date of this prospectus without the prior written consent of Bear, Stearns & Co. Inc. After the expiration of a 180-day "lock-up" period, those stockholders and option holders will be entitled to dispose of a portion of their shares upon compliance with applicable securities laws. We cannot predict the effect, if any, that future sales of these shares or the availability of those shares for future sale will have on the market price of our Class A common stock. Sales of substantial amounts of those shares or the perception that such sales could occur after the expiration of such 180- day period may adversely affect the prevailing market price of our Class A common stock. These factors could also make it more difficult to raise funds through future offerings of Class A common stock. There has been no prior market for our Class A common stock, and the market price of the shares will fluctuate. We cannot be sure that an active public market for our Class A common stock will develop or continue after the offering. Prices for our Class A common stock will be determined in the marketplace and may be influenced by many factors, including variations in our financial results, changes in earnings estimates by industry research analysts, investors' perceptions of us and general economic, industry and market conditions. The initial public offering price per share of our Class A common stock has been determined by negotiations among us and the representatives of the underwriters. Investors may not be able to sell their Class A common stock at or above the initial public offering price. We believe there are relatively few comparable companies that have publicly traded equity securities. This may also affect the trading price of our Class A common stock after the offering and make it more difficult for you to evaluate the value of our Class A common stock. The market price of our Class A common stock is likely to be highly volatile and could be subject to wide fluctuations in response to, among other things, the following factors: . trends in dog ownership and changes in consumer tastes; . changes in the popularity of our brand of dog food; . our operating performance and the performance of similar companies; . news announcements or other developments relating to us, our principal competitor or our industry; . changes in earnings estimates or recommendations by research analysts; . changes in general economic conditions; and . the significant price and volume volatility in the stock markets that has occurred in recent years and may continue to occur and that is often unrelated to the operating performance of specific companies. 14 This prospectus contains forward-looking information. This prospectus contains forward-looking statements regarding our business. When used in this prospectus, the words "anticipates," "plans," "believes," "estimates," "intends," "expects" and "projects" typically identify forward- looking statements, although not all forward-looking statements contain such words. Such statements, including, but not limited to, our statements regarding our business and operating strategies and liquidity and capital resources, are based on management's beliefs, as well as on assumptions made by, and information currently available to, management, and involve risks and uncertainties, certain of which are beyond our control. Our actual results could differ materially from those expressed in any forward-looking statement made by us or on our behalf. In light of these risks and uncertainties, we cannot assure you that any forward-looking information in this prospectus will prove to be accurate. 15 USE OF PROCEEDS We intend to use the net proceeds from the offering to provide additional funds for our operations and for general corporate purposes, including funding the expansion of our Internet operations, funding the development of new genres of animals and upgrading our pet food manufacturing and distribution facility. We may also use a portion of the net proceeds to acquire or invest in complementary businesses; however, we currently have no commitments or agreements with respect to any acquisition or investment. We cannot specify with certainty the particular uses for the remaining net proceeds to be received upon the completion of this offering. Accordingly, our management team will have broad discretion in applying the net proceeds. See "Risk Factors--Our management has broad discretion over the use of proceeds from the offering." DIVIDEND POLICY We plan to retain all of our earnings, if any, to finance the expansion of our business and for general corporate purposes and do not anticipate paying any cash dividends on our Class A or Class B common stock in the foreseeable future. Our future dividend policy will be determined by our board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities and the limitations imposed by our credit agreements. Prior to the offering, as an S corporation, we made distributions to our stockholder for federal and state income tax and other purposes, subject to limitations in our credit agreement. 16 RECLASSIFICATION OF STOCK AND PRIOR S CORPORATION STATUS On or prior to the closing of the offering, we will amend and restate our certificate of incorporation in the state of Delaware. Pursuant to the certificate of incorporation, as amended and restated, we will be authorized to issue up to shares of $.01 par value common stock, of which shares will be classified as Class A common stock and shares as Class B common stock. The Class A and Class B common stock will be identical in all respects, except that the Class A common stock will be entitled to one vote for each share and the Class B common stock will be entitled to ten votes for each share. The Class B common stock is fully convertible into Class A common stock, on a one-for-one basis, at any time at the option of the holder or upon the transfer of the Class B common stock to any person or entity not affiliated with the petchick, the dogmaster, their family, or their pets. We have been subject to taxation under Subchapter S of the Internal Revenue Code of 1986, as amended, since fiscal 1988. As a result, we currently pay no federal income tax and pay only foreign and certain state income taxes. Our earnings are subject to federal and, generally, state income taxation directly at the stockholder level. As an S corporation, we have made periodic distributions to our stockholder for the payment of such taxes without the imposition of a second tax on us. On June 29, 1999, we issued an unsecured, 5% interest-bearing note in the principal amount of $32.0 million due April 10, 2000 to our stockholder. The note represents estimated federal and state income taxes payable by our stockholders with respect to our income for fiscal 1999 and for the interim period from May 1, 1999 through September 30, 1999. We will terminate our S corporation status prior to the issuance of shares in the offering, at which time we will become subject to corporate income taxation under Subchapter C of the Internal Revenue Code. In the event our S corporation status is terminated after September 30, 1999, we may make an additional distribution to reflect our stockholders' tax liability on our taxable income through the date of the termination of our S corporation status. A portion of the net proceeds of the offering may be used to make any such additional distributions and to fund the payment of the short-term note at maturity. See "Use of Proceeds." In addition, we distributed $25.5 million in cash to the petchick on June 29, 1999 representing a portion of our previously earned and undistributed earnings, which has been fully taxed at the stockholder level. As of June 30, 1999, approximately $14.8 million of undistributed earnings were retained in our company. 17 CAPITALIZATION The following table sets forth our combined cash, indebtedness and capitalization as of April 30, 1999 on an actual basis and on a pro forma basis to reflect prior to the issuance of shares in the offering: . the contribution by our stockholders of the stock of two of our affiliated companies; . the termination of our status as an S corporation; . the distribution of $25.5 million in cash to our stockholder representing a portion of our previously earned and undistributed earnings, which has been fully taxed at the stockholder level; . the issuance to our stockholder of an unsecured, 5% interest-bearing note in the principal amount of $32.0 million due April 10, 2000; and . the reclassification of our common stock into Class A and Class B common stock. And as further adjusted to give effect to: . the offering of shares of Class A common stock at an assumed initial offering price of $ per share; and . our receipt of the estimated net proceeds of $ from the offering. This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the combined financial statements and the related notes included elsewhere in this prospectus.
April 30, 1999 -------------------- Pro forma, Actual as adjusted ------- ----------- (in thousands, except share data) Cash and cash equivalents................................. $45,727 $ ======= ======= Total debt: Long-term debt (including current portion).............. $12,791 $12,791 Amount due stockholder on April 10, 2000................ -- 32,000 ------- ------- Total debt............................................ 12,791 44,791 ------- ------- Stockholders' equity: Class A common stock, $.01 par value; as adjusted, shares authorized, shares issued and outstanding ........................................... Class B common stock, $.01 par value; as adjusted, shares authorized, shares issued and outstanding(1)......................................... 3 Additional paid-in capital.............................. 130 Accumulated comprehensive (loss)........................ (87) (87) Retained earnings....................................... 72,214 ------- ------- Total stockholders' equity............................ $72,260 $ ------- ------- Total capitalization.................................. $85,051 $ ======= =======
- -------- (1) Prior to the offering, two of our affiliated companies were combined with us. As of April 30, 1999, the capital stock of the combining entities was as follows: BetterDogFood.Com. (formerly Acme Pet Foods, Inc.) common stock, no par value, 12,500 shares authorized, and 100 shares issued and outstanding; BetterDogFood (Canada), Inc. common shares, no par value, unlimited authorization, and 100 shares issued and outstanding, and Dog Music Publishing, Inc. common stock, no par value, 5,000 shares authorized, and 100 shares issued and outstanding. 18 SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA The following table sets forth our selected historical combined financial data for each of the five fiscal years in the period ended April 30, 1999 and as of the end of each such fiscal year and selected unaudited pro forma financial data as of, and for the fiscal year ended, April 30,1999. The selected historical combined financial data as of April 30, 1998 and 1999 and for the fiscal years ended April 30, 1997, 1998 and 1999 have been derived from the audited combined financial statements included elsewhere in this prospectus. The selected historical combined financial data as of April 30, 1995, 1996 and 1997 and for the fiscal years ended April 30, 1995 and 1996 have been derived from our audited combined financial statements, which have not been included in this prospectus. You should read the selected historical combined financial data in conjunction with our historical combined financial statements, the related notes and the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. The unaudited pro forma combined balance sheet and statement of operations data included in the table are based upon information in our combined balance sheet as of April 30, 1999 and our combined statement of operations for fiscal 1999, which appear elsewhere in this prospectus, after giving effect to the pro forma adjustments described in the notes to the table. Such adjustments have been made assuming the transactions reflected in the pro forma combined financial data took place on April 30, 1999 for balance sheet purposes and May 1, 1998 for statement of operations purposes. The unaudited pro forma combined financial data are provided for informational purposes only and do not purport to be indicative of the results of operations and financial position that would have been obtained or that may be expected to occur in the future. We elected, beginning with our fiscal year ended April 30, 1988, to be subject to the provisions of Subchapter S of the Internal Revenue Code. Accordingly, since that time, our taxable income or loss has been included in the federal and certain state income tax returns of our stockholder. The provision for income taxes reflected in our historical combined financial statements since fiscal 1988 relates only to foreign and certain state income taxes for those states that do not recognize Subchapter S corporations. Our stockholders are responsible for the payment of federal and certain state income taxes with respect to our operations, which have been funded by distributions from our undistributed earnings account. Prior to the issuance of shares in the offering, we will terminate our election to be subject to the provisions of Subchapter S and will become subject to the provisions of Subchapter C of the Internal Revenue Code. As a C corporation, we will be fully subject to federal, state and foreign income taxes. EBITDA represents income from operations plus depreciation and amortization. EBITDA is presented because management believes that such information is considered by certain investors to be an additional basis for evaluating a company's operating performance, leverage and liquidity. EBITDA should not be considered an alternative to measures of operating performance determined in accordance with generally accepted accounting principles or as a measure of our operating results and cash flows or as a measure of our liquidity. 19
Fiscal Year Ended April 30, ----------------------------------------------------- 1995 1996 1997 1998 1999 --------- --------- --------- --------- --------- (dollars in thousands, except per share data) Combined Statement of Operations Data: Net revenues............ $ 87,352 $ 85,815 $ 81,863 $ 126,231 $ 251,474 Cost of revenues........ 60,558 55,172 60,958 87,969 146,618 Selling, general and administrative expenses............... 26,205 22,934 25,862 26,117 45,559 Depreciation and amortization........... 2,570 2,354 1,729 1,676 1,946 Other income (expense), net.................... (2,184) (2,051) (5) (1,540) 622 --------- --------- --------- --------- --------- Income (loss) before income taxes........... (4,165) 3,304 (6,691) 8,929 57,973 Provision (benefit) for income taxes........... 266 105 (186) 463 1,943 --------- --------- --------- --------- --------- Net income (loss)....... $ (4,431) $ 3,199 $ (6,505) $ 8,466 $ 56,030 ========= ========= ========= ========= ========= Unaudited Pro Forma Combined Statement of Operations Data: Historical income before income taxes........................... $ 57,973 Pro forma adjustment other than income taxes.................... 2,515 (1) --------- Pro forma income before income taxes............................ 55,458 Pro forma provision for income taxes............................ 22,227 (2) --------- Pro forma net income............................................ $ 33,231 ========= Pro forma earnings per common share (basic and diluted)......... $ (3) Combined Statement of Cash Flows Data: Net cash provided by (used in) operating activities............. $ (2,277) $ 2,245 $ 3,628 $ 6,256 $ 57,646 Net cash provided by (used in) investing activities............. (1,383) 1,510 (849) (1,294) (14,634)(4) Net cash provided by (used in) financing activities............. (192) (4,476) (1,803) 1,974 (6,082) Other Financial Data: EBITDA.................. $ 589 $ 7,709 $ (4,957) $ 12,145 $ 59,297 Capital expenditures.... 1,568 343 892 1,294 3,756 Other Non-Financial Data: Number of live events... 333 263 199 218 199 Total attendance........ 1,163,259 931,954 1,080,540 1,599,716 2,273,748 Average weekly Nielsen rating of Raw is War... 3.0 3.0 2.4 3.1 5.0 Pay-per-view buys....... 1,868,900 2,831,700 2,252,200 2,936,000 5,024,700
As of April 30, ---------------------------------------------------- Pro forma, as adjusted 1999 1995 1996 1997 1998 1999 (unaudited) ------- ------- ------- ------- -------- ----------- (in thousands) Combined Balance Sheet Data: Cash and cash equivalents............ $ 1,606 $ 885 $ 1,861 $ 8,797 $ 45,727 $ (5)(6) Property and equipment- net.................... 32,497 27,368 26,499 26,117 28,377 28,377 Total assets............ 51,134 46,739 41,856 59,594 130,188 (5)(6) Total long-term debt (including current portion)............... 10,332 7,608 8,267 12,394 12,791 12,791 Amount due stockholder.. -- -- -- -- -- 32,000 (7) Total stockholder's equity................. 23,792 25,304 16,420 22,697 72,260 (8)
20 - -------- (1) This amount gives pro forma effect to the increase in compensation to our management team pursuant to employment agreements that will become effective upon the closing of the offering. See "Management." Historically, both executives were paid less compensation because they benefited from S Corporation distributions to the dogmaster and the petchick. (2) This amount represents a pro forma estimate of our provision for federal, state and foreign income taxes to give effect to the change in our tax status to a C corporation during fiscal 1999. Prior to the issuance of shares in the offering, we will terminate our status as an S corporation. See "Reclassification of Stock and Prior S Corporation Status." (3) Based on a weighted average number of common shares outstanding of for the year ended April 30, 1999. (4) In fiscal 1999, we purchased a 193-room doghouse in Las Vegas, Nevada for approximately $10.8 million. We have since determined that the ownership and operation of this property is no longer consistent with our business objectives, and we intend to sell this property during fiscal 2000. (5) Reflects the distribution of $25.5 million to our stockholder, the petchick, on June 29, 1999 representing a portion of previously earned and undistributed earnings, which have been fully taxed at the stockholder level. As of June 30, 1999, approximately $14.8 million of undistributed earnings were retained in our company. (6) Reflects our receipt of the estimated net proceeds of the offering of $ . (7) Reflects the accrual of tax distributions in the amount of $32.0 million relating to estimated federal and state income taxes payable by our stockholders with respect to our earnings in fiscal 1999 and the period from May 1, 1999 through September 30, 1999. On June 29, 1999, we issued an unsecured, 5% interest-bearing note in the principal amount of $32.0 million due April 10, 2000 to our stockholder. (8) Gives effect to the pro forma adjustments described in notes 5, 6 and 7 above. 21 EX-21.1 14 LIST OF SIGNIFICANT SUBSIDIARIES EXHIBIT 21.1 LIST OF SIGNIFICANT SUBSIDIARIES Name Jurisdiction - ---- ------------ www.DoggieBlog, Inc. Delaware EX-23.2 15 CONSENT OF DEPOOCH & TOUCHE LLP Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of BetterDogFood.Com on Form S-1 of our report dated July 16, 1999, appearing in the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. Depooch & Touche LLP Stamford, CT July 29, 1999 EX-27.1 16 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS APR-30-1999 MAY-01-1998 APR-30-1999 45,727 0 38,429 920 2,939 99,207 51,723 (23,346) 130,188 46,525 11,410 0 0 3 72,257 130,188 251,474 251,474 146,618 146,618 47,505 920 1,125 57,973 1,943 56,030 0 0 0 56,030 0.00 0.00
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