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Bigstar Entertainment Inc/NY – ‘10QSB’ for 6/30/01 – ‘10-Q’

On: Monday, 8/20/01, at 3:51pm ET · For: 6/30/01 · Accession #: 1019056-1-500391 · File #s: 0-26793 (10-Q), 0-26793 · Correction: This Filing’s metadata (e.g., “Filed as of” Date) was Corrected by the SEC on 4/30/03. `®`

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/20/01  Bigstar Entertainment Inc/NY      10QSB®      6/30/01    1:58K                                    Borer Fin’l Comms Inc

Quarterly Report by a Small Business — Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Form 10Qsb                                            21    100K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Financial Statements Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Signatures Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
3	Item 1. Financial Statements
10	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
19	Item 1. Legal Proceedings
"	Item 4. Submission of Matters to A Vote of Security Holders
"	Item 5. Exhibits and Reports on Form 8-K
20	Signatures

10-Q 1st Page of 21 TOC ↑Top Previous Next ↓Bottom Just 1st
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 -----------------

 FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES        
EXCHANGE ACT OF 1934                                                

FOR THE QUARTERLY PERIOD ENDED June 30, 2001

OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES       
EXCHANGE ACT OF 1934                                                

COMMISSION FILE NUMBER 000-26793

 BIGSTAR ENTERTAINMENT, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

       Delaware                                13-339-5258
  -------------------------------               ----------------------
(State or other jurisdiction of                  (IRS Employer    
   incorporation or organization)               Identification Number)

19 Fulton Street - 5th Floor
New York, New York 10038
 ---------------------------------------------------
 (Address of Principal Executive Offices) (Zip Code)

(212) 981-6300
----------------------------------------------------
(Registrant's telephone number, including area code)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes [X]. No [ ].                      

   Indicate the number of shares outstanding of each of the issuer's
classes of common stock, $0.001 par value, as of the latest practicable date:   

 7,956,116 shares of common stock as of August 8, 2001

10-Q 2nd Page of 21 TOC 1st Previous Next ↓Bottom Just 2nd
 BIGSTAR ENTERTAINMENT, INC.

 FORM 10-Q

 FOR THE QUARTER ENDED June 30, 2001

 INDEX

 PART I.
 FINANCIAL INFORMATION

                                                        [Enlarge/Download Table]


                                                                                            PAGE NO.
ITEM 1.  FINANCIAL STATEMENTS                                                                       

                                                                                                    
Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000...............   3   

Consolidated Statements of Operations for the three- and six-month periods ended                    
June 30, 2001 (unaudited)and June 30, 2000 (unaudited).......................................   4   

Consolidated Statements of Cash Flows for the three- and six-month periods ended                    
June 30, 2001 (unaudited) and June 30, 2000 (unaudited)......................................   5   

Notes to Condensed Consolidated Financial Statements.........................................   6   

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                                          
CONDITION AND RESULTS OF OPERATIONS..........................................................  10   

                                    PART II.                                                        
                                OTHER INFORMATION                                                   

ITEM 1.  LEGAL PROCEEDINGS...................................................................  19   

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................  19   

ITEM 5.  EXHIBITS AND REPORTS ON FORM 8-K....................................................  19   

SIGNATURES...................................................................................  20   

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 PART I.
 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.                                                   

 BIGSTAR ENTERTAINMENT
 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]


                                                               June 30, 2001   December 31, 
                                                                 (unaudited)       2000     
                                                                ------------   ------------ 
                                                                                            
ASSETS:                                                                                     
Cash and cash equivalents                                       $  3,017,659   $  5,373,100 
Accounts receivable, net of allowance                                      0        267,648 
Prepaids and other current assets                                    325,225        565,655 
                                                                ------------   ------------ 

         Total current assets                                      3,342,884      6,206,403 
                                                                ------------   ------------ 

Property and equipment, net                                          736,174      1,228,709 
Other assets                                                          46,140        126,290 
                                                                ------------   ------------ 

Total assets                                                    $  4,125,198   $  7,561,402 
                                                                ============   ============ 

LIABILITIES:                                                                                
Accounts payable                                                $    637,452   $  1,359,470 
Accrued expenses                                                     166,938        692,740 
Accrued payroll costs                                                  7,841        209,241 
                                                                ------------   ------------ 

Total current liabilities                                            812,231      2,261,451 
                                                                ------------   ------------ 

Other non-current liabilities                                        130,674              0 
                                                                ------------   ------------ 

Total liabilities                                                    942,905      2,261,451 
                                                                ------------   ------------ 

MINORITY INTEREST                                               $    178,993   $    178,993 
                                                                ------------   ------------ 

STOCKHOLDERS' EQUITY:                                                                       

Common Stock, $.001 par value; 40,000,000 shares authorized;                                
   10,187,445 issued and 7,956,116 and 9,384,687 outstanding                                
   at June 30, 2001 and December 31, 2000, respectively               10,187         10,187 
Treasury Stock, 2,231,329 and 802,758 shares at June 30, 2001                               
   and December 31, 2000, respectively                               (81,225)       (24,083)
Additional paid-in capital                                        47,919,819     47,919,819 
Accumulated deficit                                              (44,845,481)   (42,784,965)
                                                                ------------   ------------ 

Total stockholders' equity                                         3,003,300      5,120,958 
                                                                ------------   ------------ 

Total liabilities and stockholders' equity                      $  4,125,198   $  7,561,402 
                                                                ============   ============ 

The accompanying notes are an integral part of these condensed financial        
statements.                                                                     

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                                     BIGSTAR ENTERTAINMENT, INC.
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)

                                                        [Enlarge/Download Table]


                                                        Six Months      Six Months     Three Months    Three Months  
                                                           Ended           Ended           Ended           Ended     
                                                       June 30, 2001   June 30, 2000   June 30, 2001   June 30, 2000 
                                                        ------------    ------------    ------------    ------------ 
                                                                                                                     
NET SALES                                               $  1,476,205    $  6,797,155    $    710,939    $  2,590,617 
COST OF REVENUES                                           1,113,533       6,133,284         529,768       2,121,576 
                                                        ------------    ------------    ------------    ------------ 

         Gross profit                                        362,672         663,871         181,171         469,041 

OPERATING EXPENSES                                                                                                   
         Sales and marketing                                 (53,342)      5,897,324         (89,147)      2,311,708 
         General and administrative                        1,555,246       2,826,912         569,341       1,258,477 
         Website and software development                    999,221       4,678,621         466,051       2,324,053 
                                                        ------------    ------------    ------------    ------------ 

         Total operating expenses                          2,501,125      13,402,857         946,245       5,894,238 
                                                        ------------    ------------    ------------    ------------ 

                Loss from operations                      (2,138,453)    (12,738,986)       (765,074)     (5,425,197)

INTEREST INCOME, net                                          77,937         550,608          28,156         268,777 
                                                        ------------    ------------    ------------    ------------ 

         Net loss                                       $ (2,060,516)   $(12,188,378)   $   (736,918)   $ (5,156,420)
                                                        ============    ============    ============    ============ 

PER SHARE INFORMATION:                                                                                               

         Net loss per share -                                                                                        
                  Basic and diluted                     $      (0.25)   $      (1.20)          (0.09)   $      (0.51)
                                                        ============    ============    ============    ============ 

         Weighted average common shares outstanding -                                                                
                  Basic and diluted                        8,303,392      10,140,012      7,956,1158      10,172,427 
                                                        ============    ============    ============    ============ 

The accompanying notes are an integral part of these condensed consolidated financial statements                     

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 BIGSTAR ENTERTAINMENT, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

                                                        [Enlarge/Download Table]


                                                                Six Months      Six Months      Three Months    Three Months 
                                                                   Ended           Ended           Ended           Ended     
                                                               June 30, 2001   June 30, 2000   June 30, 2001   June 30, 2000 
                                                                ------------    ------------    ------------    ------------ 
                                                                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                        
         Net loss                                               $ (2,060,516)   $(12,188,378)   $   (736,918)   $ (5,156,420)
           Depreciation and amortization                             422,309         540,963         210,678         298,310 
           Allowance for doubtful accounts                                 0          30,000               0               0 
           Non-cash common stock option and warrant expenses               0         557,672               0         261,694 
           Amortization of investment discount                             0         (42,767)              0          (1,447)
           Changes in assets and liabilities -                                                                               
              Accounts receivable                                    267,614         359,587          44,201         509,920 
              Prepaids and other current assets                      240,464         161,864         (11,654)        412,317 
              Other non current assets                                80,150          54,841          36,949          50,441 
              Accounts payable and accrued expenses               (1,449,214)       (456,413)       (343,884)       (760,205)
              Other non-current liabilities                          130,674               0         130,674               0 
                                                                ------------    ------------    ------------    ------------ 
         Net cash used in operating activities                    (2,368,519)    (10,982,631)       (669,954)     (4,385,390)
                                                                ------------    ------------    ------------    ------------ 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                        
         Capital expenditures                                              0      (1,406,953)              0      (1,059,499)
         Sale and return of equipment                                 70,220               0          45,677               0 
         Redemption of Investments                                         0       6,945,000               0       3,945,000 
                                                                ------------    ------------    ------------    ------------ 
                Net cash provided by investing activities             70,220       5,538,047          45,677       2,885,501 
                                                                ------------    ------------    ------------    ------------ 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                        
         Proceeds from issuance of common stock                            0         779,560               0         271,496 
         Purchase of treasury stock                                  (57,142)              0               0               0 
                                                                ------------    ------------    ------------    ------------ 
         Net cash provided by (used in) financing activities         (57,142)        779,560               0         271,496 
                                                                ------------    ------------    ------------    ------------ 

         Net increase (decrease) in cash and cash equivalents     (2,355,441)     (4,665,024)       (624,277)     (1,228,393)
                                                                ------------    ------------    ------------    ------------ 

CASH AND CASH EQUIVALENTS, beginning of period                  $  5,373,100    $ 17,422,817    $  3,641,936    $ 13,986,186 
                                                                ------------    ------------    ------------    ------------ 

CASH AND CASH EQUIVALENTS, end of period                        $  3,017,659    $ 12,757,793    $  3,017,659    $ 12,757,793 
                                                                ============    ============    ============    ============ 

SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING ACTIVITIES                                                                       
         Warrants issued for future services                    $         --    $     31,145    $         --    $     31,145 

The accompanying notes are an integral part of these consolidated condensed     
financial statements.                                                           

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 BIGSTAR ENTERTAINMENT, INC.

 NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 - OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:               

Overview                                                                        

       BigStar Entertainment, Inc. ("BigStar" or the "Company") is an online
retailer of filmed entertainment products and a provider of information about   
the filmed entertainment industry and its products. Through our website,        
bigstar.com, we have been selling more than 45,000 videos and digital video     
discs or DVDs, including feature films, children's movies, and educational,     
health and fitness, and instructional videos, and provide information on these  
products.                                                                       

        In addition to selling filmed entertainment, bigstar.com features more
than 4,500 biographies, 2,200 movie stills and 400 star interviews. Bigstar.com 
also hosts our BigStar Broadband Theater. This feature offers visitors to our   
website the ability to stream and view on their computer more than 7,500 movie  
trailers and 21 feature films. We believe that BigStar Broadband Theater        
provides one of the largest selections of streaming movie trailers and films    
available on the Internet.                                                      

       As a result of operating losses incurred by the Company's businesses,
the significant decline in market value of Internet-based companies, and the    
difficulty in raising additional capital for such companies, the Company        
announced in September 2000 that it had retained a financial advisor to review  
the recoverability of the amounts invested and projected to be invested into its
retail operations and direct marketing division, Advaya. The Company and its    
financial advisors determined that a sale of Advaya's assets was in the best    
interests of the Company's stockholders. Accordingly, the assets related to this
business were sold in December 2000 at a loss of $952,616.                      

       Given the factors noted above, the Company and its financial advisors
have determined that it was necessary to restructure part of BigStar's current  
e-commerce platform. As of July 1, 2001, the Company entered into an agreement  
with a competitor whereby the Company will be compensated for referring         
customers to the competitor's website. As a result of this agreement, the       
Company no longer operates its e-tailing business and has completely outsourced 
this function. We are considering selling the website, with a view to conserving
our cash and redeploying BigStar's remaining assets into businesses which have  
the potential for achieving profitability sooner with potentially higher returns
on investment. Potential business lines being contemplated by BigStar management
include, but are not limited to, the sale of online film marketing data,        
electronic payments processing, third party site development, as well as other  
technology development efforts. BigStar may also decide to merge or sell assets 
to third parties in these or other businesses in an effort to maximize          
stockholder value. There can be no assurances that the sale of the bigstar.com  
site platform, or parts thereof, will be consummated or that efforts to conserve
our cash will be successful. Furthermore, there may not be suitable business    
opportunities into which we may invest our remaining resources or that any such 
opportunity will ultimately be successful.                                      

Basis of Presentation                                                           

    The consolidated balance sheet as of June 30, 2001 and the balance
sheet as of December 31, 2000, and the consolidated statements of operations and
cash flows for the three and six months ended June 30, 2001 and the statements  
of operations and cash flows for the three and six months ended June 30, 2000   
have been prepared by the Company pursuant to the rules and regulations of the  
Securities and Exchange Commission ("SEC"). These June 30, 2001 unaudited       
(consolidated) financial statements have been prepared on the same basis as the 

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December 31, 2000 audited financial statements and, in the opinion of           
management, include all adjustments, consisting only of normal recurring        
adjustments, necessary to state fairly the financial information included, in   
accordance with generally accepted accounting principles. Certain information   
and footnote disclosures normally included in consolidated financial statements 
prepared in accordance with generally accepted accounting principles have been  
omitted pursuant to such SEC rules and regulations. The results of operations   
for the interim period ended June 30, 2001 are not necessarily indicative of the
results which may be reported for any other interim period or for the year      
ending December 31, 2001.                                                       

       Certain amounts in the prior period have been reclassified to conform
to the current period's presentation.                                           

Use of Estimates                                                                

         The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the consolidated 
financial statements and the reported amounts of revenues and expenses during   
the reporting period. Actual results could differ from those estimates.         

Revenue Recognition                                                             

       Revenue consists of sales of filmed entertainment in popular formats,
primarily videos and DVDs, over the Company's websites and online advertising   
and promotional revenues. The Company recognizes revenue from its website when  
the products are shipped to customers and when advertisements and promotional   
items are served and marketing promotions delivered. Outbound shipping and      
handling charges are also included in net sales. In accordance with the Emerging
Issues Task Force Issue ("EITF") 00-14 "Accounting For Certain Sales            
Incentives," ("EITF 00-14"), revenues for the three and six-month periods ended 
June 30, 2001 and June 30, 2000 include sales to customers who used             
approximately $4,000, $14,000, $198,000 and $1,222,000 respectively, of coupons 
for discounts on their purchases of filmed entertainment products. At June 30,  
2001, the Company reversed $17,000 of its coupon liability previously charged   
against sales. Since the Company is no longer shipping products to customers,   
the outstanding coupons will never be redeemed. Previously, the cost of these   
coupons was included in sales and marketing expenses; however, all prior period 
financial statements presented have been reclassified to conform to the current 
period's classification. Provision is made for the estimated effect of sales    
returns where right-of-return privileges exist. Returns of product from         
customers are accepted in accordance with standard industry practice. The       
Company provides an allowance for sales returns based on historical returns     
experience.                                                                     

      For the three and six months ended June 30, 2001 and 2000, net sales
included barter revenues of 2.7%, 5.9%, 0% and 3.5% respectively. The Company   
places an advertisement on its customers' websites in exchange for placing its  
customers' advertisements on the Company's website. Revenues from these         
transactions are based upon the Company's "cost per thousand impressions,"      
utilized in similar transactions, and the number of impressions delivered.      
Revenues are recognized ratably over the term of the contract. Barter expenses, 
which approximate barter revenues, are recorded in sales and marketing expenses 
in the accompanying consolidated statements of operations (unaudited).          

Cost of Revenues                                                                

         Cost of revenues includes the cost of the filmed entertainment product,
as well as shipping and handling costs and the cost of promotional items        
distributed to customers with purchases. In accordance with EITF 00-14, costs   

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for promotional items are included in the cost of revenues and for the three and
six month periods ended June 30, 2001 were nominal. Costs for promotional items 
included in the cost of sales for the three and six month periods ended June 30,
2000 were approximately $71,000 and $227,000, respectively. Previously, the cost
of these promotional items was included in sales and marketing expenses;        
however, all prior period financial statements presented have been reclassified 
to conform to the current period's classification.                              

Dependence on Suppliers                                                         

       Although the Company has agreements with two independent suppliers to
provide filmed entertainment products and related order fulfillment services, it
has no fulfillment operation or warehouse facility of its own and, accordingly, 
is dependent on maintaining its existing fulfillment relationships. There can be
no assurance that the Company will maintain its relationships with these vendors
beyond the term of the existing agreements. Further, should the Company's       
relationship with any one of these vendors terminate unexpectedly, it may not be
able to find an alternative, comparable vendor capable of providing fulfillment 
services on satisfactory terms to the Company and, therefore, there may be an   
adverse effect on the Company's results of operations.                          

Net Loss Per Share                                                              

    The Company accounts for net loss per share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share." In accordance with SFAS No.   
128, basic earnings per share is computed using the weighted average number or  
common and dilutive common equivalent shares outstanding during the period.     
Common equivalent shares, consist of the incremental common shares issuable upon
the exercise of stock options, and warrants (using the Treasury Stock Method);  
common equivalent shares are excluded from the calculation if their effect is   
anti-dilutive. Diluted loss per share for the three months ended June 30, 2001, 
and June 30,2000 does not include the impact of 1,803,492 and 2,463,000 and     
common stock options and warrants then outstanding, respectively, as the effect 
of their inclusion would be anti-dilutive.                                      

Computer Software Developed for Internal Use                                    

  In January 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed for Internal Use" ("SOP
98-1"), which provides guidance for determining whether computer software is    
internal-use software and on accounting for the proceeds of computer software   
originally developed for internal use and then subsequently sold to the public. 
It also provides guidance on capitalization of the costs incurred for computer  
software developed or obtained for internal use.                                

       For the three and six months ended June 30, 2001, the Company did not
incur and therefore did not capitalize any costs relating to the functionality  
of its website. For the three and six months ended June 30, 2000, the Company   
capitalized approximately $1,110,000 and $1,358,000, respectively, of external  
direct costs related to increased functionality of its website, which will be   
amortized over the related useful life of two years. All costs incurred for     
upgrades, maintenance, and enhancements that did not result in additional       
functionality were expensed.                                                    

Comprehensive Income                                                            

   The Company adheres to the provisions of SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying 
comprehensive income and its components in a full set of general purpose        
financial statements. Accordingly, the Company's comprehensive net loss is equal
to its net loss for the three and six months ended June 30, 2001, and the three 
and six months ended June 30, 2000.                                             

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Recent Accounting Pronouncements                                                

        In January 2000, the Company adopted EITF Issue 99-17, "Accounting for
the Advertising of Barter Transactions" ("EITF Issue 99-17"), which changed the 
method by which barter revenues can be recognized as revenue. Barter            
transactions entered into after January 20, 2000 are accounted for at fair value
on a one-for-one basis with revenue received by the seller of the advertising   
for similar advertising sold for cash. The adoption of EITF Issue 99-17 did not 
impact the Company's consolidated financial statements.                         

  In July 2000, the Company adopted EITF No. 00-2, "Accounting for
Website Development Costs" ("EITF 00-2"), which provides guidance on when to    
capitalize versus expense costs incurred to develop a website. The adoption of  
EITF 00-2 did not have a material impact on the Company's consolidated financial
position or results of operations.                                              

        In May 2000, the Company adopted EITF No.00-14 "Accounting for Certain
Sales Incentives," which specified the accounting for and classification of     
coupons and promotional items. Accordingly, the cost of coupons redeemed by     
consumers are deducted in the determination of net sales and the cost of        
promotional items distributed to customers with purchases are included in cost  
of revenues. Previously, these costs were included in sales and marketing       
expense. The financial statements for prior periods presented have been         
reclassified to conform to the current period's classifications.                

   On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards "SFAS" 141, Business         
Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is         
effective for all business combinations completed after June 30, 2001. SFAS 142 
is effective for fiscal years beginning after December 15, 2001; however,       
certain provisions of this Statement apply to goodwill and other intangible     
assets acquired between July 1, 2001 and the effective date of SFAS 142. Major  
provisions of these Statements and their effective dates for the company are as 
follows:                                                                        

       o        All business combinations initiated after June 30, 2001 must
                  use the purchase method of accounting. The pooling of interest
              method of accounting is prohibited except for transactions
initiated before July 1, 2001.              
       o        Intangible assets acquired in a business combination must be
        recorded separately from goodwill if they arise from
               contractual or other legal rights or are separable from the
                  acquired entity and can be sold, transferred, licenses, rented
            or exchanged either individually or as part of a related
contract, asset or liability.               
        o        Goodwill, as well as intangible assets with indefinite lives,
                  acquired after June 30, 2001, will not be amortized. Effective
           January 1, 2002, all previously recognized goodwill and
             intangible assets with indefinite lives will no longer be
subject to amortization.                    
         o        Effective January 1, 2002, goodwill and intangible assets with
               indefinite lives will be tested for impairment annually and
whenever there is an impairment indicator.  
        o        All acquired goodwill must be assigned to reporting units for
         purposes of impairment testing and segment reporting.

    Although it is still reviewing the provisions of these statements,
management's preliminary assessment is that these statements will not have a    
material impact on the Company's financial position or results of operations.   

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NOTE 2 - STOCKHOLDER'S EQUITY                                                   

Repurchase of Shares                                          

         In December 2000 and February 2001, the Company repurchased 802,758 and
1,428,571 shares, respectively, of common stock from two former major           
shareholders for a total of $81,225. These purchases are reflected in treasury  
shares.                                                                         

NOTE 3 - Liquidity                                                              

        The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate continuation of 
the Company as a going concern. We have an accumulated deficit of approximately 
$44,845,000 as of June 30, 2001. The Company has incurred a loss from operations
in all periods since inception. There are also risks associated with the        
decision to suspend our e-tailing business. The Company has operations to date  
primarily through the sale of common stock, however, we have been unsuccessful  
in raising additional funding. The Company may seek additional funding through  
public or private financing or other arrangements to continue our present       
business or pursue new business opportunities. Adequate funds may not be        
available when needed or may not be available on terms acceptable to the        
Company. If additional funds are raised by issuing equity securities, dilution  
to existing stockholders could result. If funding is insufficient at any time in
the future, the Company may be unable to develop or enhance our products and    
services, take advantage of business opportunities or respond to competitive    
pressures, any of which could have a material adverse effect on our business,   
financial condition and results of operations. These matters raise substantial  
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the financial statements to reflect this.                     

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                

     Except for historical information, the statements in this Form 10-Q
report (including, without limitation, the discussion under the heading "Results
of Operations") contain forward-looking statements that involve risks and       
uncertainties. The Company's actual results could differ materially from those  
discussed herein. Factors that could cause or contribute to such differences    
include, but are not limited to, those discussed below, and the risks discussed 
under the caption, "Item 2. Risk Factors That May Affect Results of Operations  
and Financial Condition." The following discussion should be read in conjunction
with the Company's financial statements and the related notes to those          
statements and the other financial information appearing elsewhere in this Form 
10-Q. Readers are also urged to carefully review and consider the various       
disclosures made by us which attempt to advise interested parties of the factors
which affect our business, including without limitation the disclosures made    
under the captions "Management's Discussion and Analysis of Financial Condition 
and Results of Operations" and "Risk Factors" and the audited financial         
statements and related footnotes included herein and in the Company's Form 10-K 
filed April 2, 2001.                                                            

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OVERVIEW                                                                        

        BigStar was incorporated in March 1998. We began offering products for
sale on our website, www.bigstar.com, in May 1998. Until that time, our         
operating activities related primarily to the development of the bigstar.com    
website.                                                                        

     Since our inception, we have incurred significant operating losses.
These losses primarily result from development costs associated with building   
our websites and order processing systems, and marketing, advertising and       
promotion expenses and the continued operation of our business. As of June 30,  
2001, we had an accumulated deficit of $44,845,481. We expect to continue       
incurring operating and net losses and negative cash flow from operations, while
we consider strategy alternatives for the Company.                              

  As of July 1, 2001, the Company entered into an agreement with a
competitor whereby the Company will be compensated for referring customers to   
the competitor's website. As a result of this agreement, the Company no longer  
operates its e-tailing business and has completely outsourced this function. We 
are considering selling the website, with a view to conserving our cash and     
redeploying BigStar's remaining assets into businesses which have the potential 
for achieving profitability sooner with potentially higher returns on           
investment. Potential business lines being contemplated by BigStar management   
include, but are not limited to, the sale of online film marketing data,        
electronic payments processing, third party site development, as well as other  
technology development efforts. BigStar may also decide to merge or sell assets 
to third parties in these or other businesses in an effort to maximize          
stockholder value. There can be no assurances that the sale of the bigstar.com  
site platform, or parts thereof, will be consummated or that efforts to conserve
our cash will be successful. Furthermore, there may not be suitable business    
opportunities into which we may invest our remaining resources or that any such 
opportunity will ultimately be successful.                                      

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RESULTS OF OPERATIONS -- Three- and Six-Month Periods Ended June 30, 2001 and   
June 30, 2000.                                                                  

        NET SALES. Net sales were approximately $711,000 for the quarter ended
June 30, 2001 compared to $2,591,000 for the quarter ended June 30, 2000. For   
the six months ended June 30, 2001, net sales were approximately $1,476,000     
compared to $6,797,000 for the six months ended June 30, 2000. Net sales reflect
sales of filmed entertainment products, net of returns, and include shipping and
handling charges, as well as advertising and promotional revenues for the six   
months ended June 30, 2001. Sales are recognized upon the shipment of filmed    
entertainment products.                                                         

 The Company recognized approximately $43,000 in advertising and
promotional revenues for the quarter ended June 30, 2001 and $125,000 for the   
six months ended June 30, 2001, including approximately $19,000 and $88,000,    
respectively in barter advertising revenues. The Company recognized             
approximately $407,000 in advertising and promotional revenues for the quarter  
ended June 30, 2000 and $1,164,000 for the six months ended June 30, 2000,      
including $235,000 in barter transactions.                                      

      Coupons used by customers for discounts on their purchases of filmed
entertainment products included in net sales for the three months ended June 30,
2001 and June 30, 2000 were approximately $4,000 and $198,000, respectively and 
for the six months ended June 30, 2001 and June 30, 2000 were approximately     
$14,000 and $1,222,000, respectively. At June 30, 2001 the Company reversed     
approximately $17,000 of its unnecessary coupon liability previously charged    
against net sales. Previously, the cost of these coupons was included in sales  
and marketing expenses; however, all prior period financial statements presented
have been reclassified to conform to the current period's classification.       

      Sales for the six months ended June 30, 2001 and 2000, respectively,
consisted of both the videocassette and DVD formats. The decrease in sales of   
filmed entertainment products primarily reflects a significant decrease in units
sold due to lower unit volumes of both videocassettes and DVDs. The reduction in
advertising and promotional revenues reflects lower rates and overall lower     
advertising sales. We are unable to anticipate future orders or the acquisition 
of additional customers due to the changing dynamics of online retailing and our
decision to reduce promoting the website and move out of the e-tailing business.
Customer orders and customer acquisitions have traditionally been dependent on  
marketing and promotional programs.                                             

        During 2000, the Company significantly reduced its sales and marketing
activities. No significant spending for marketing and promotional programs      
occurred for the six months ending June 30, 2001 and no significant spending is 
anticipated through the end of 2001, which is likely to result in the continuing
of our downward trend of acquiring new customers and orders. In addition, the   
Company revised its pricing policies during the year 2000 in order to achieve   
higher gross margins on sales of filmed entertainment products, which also      
impacted the level of customer orders and customer acquisitions.                

        COST OF REVENUES. Cost of revenues were approximately $530,000 for the
quarter ended June 30, 2001 compared to $2,122,000 for the quarter ended June   
30, 2000. Gross profit for the quarter ended June 30, 2001 was approximately    
$181,000, resulting in a gross margin of 25.5%. Gross profit for the quarter    
ended June 30, 2000 was approximately $469,000, resulting in a gross margin of  
18.1%. Cost of revenues for the six months ended June 30, 2001 were             
approximately $1,114,000 compared to $6,133,000 for the six months ended June   
30, 2000. Gross profit for the six months ended June 30, 2001 was approximately 
$363,000, resulting in a gross margin of 24.6%. Gross profit for the six months 
ended June 30, 2000 was approximately $664,000, resulting in a gross margin of  
9.8%.                                                                           

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     Cost of revenues includes the cost of merchandise sold and outbound
shipping and handling charges and the cost of promotional items distributed to  
customers with purchases. Promotional items for the three and six months ended  
June 30, 2001 and June 30, 2000 were nominal for 2001 and approximately $71,000 
and $227,000 respectively for 2000. Previously, the cost of these promotional   
items was included in sales and marketing expenses; however, all prior period   
financial statements presented have been reclassified to conform to the current 
period's classification. The increase in the gross profit for the periods ended 
June 30, 2001 as compared to the periods ended June 30, 2000 reflects selling   
prices on videos and DVDs that reflect smaller discounts from their suggested   
retail prices, a large reduction in the use of coupons as a promotional cost and
lower shipping and handling costs as a percentage of selling prices.            

    SALES AND MARKETING EXPENSES. Sales and marketing expenses for the
quarter ended June 30, 2001 was a credit of approximately $89,000 resulting from
studio rebates and collection of accounts receivable previously reserved for,   
compared to costs of approximately $2,312,000 for the quarter ended June 30,    
2000. For the six months ending June 30, 2001, sales and marketing expenses were
a credit of approximately $53,000 compared to costs of $5,897,000 for the same  
period ending June 30, 2000. This reflects the Company's decision to move out of
the e-tailing business. Sales and marketing expenses consist primarily of the   
costs of advertising, promotion and marketing programs, as well as personnel    
costs.                                                                          

        Advertising expenses were a credit of approximately $27,000, primarily
due to studio credits for the quarter ended June 30, 2001 compared with costs of
$1,551,000 for the quarter ending June 30, 2001. For the six months ended June  
30, 2001 and June 30, 2000, advertising costs were credits of approximately     
$10,000 and costs of approximately $4,550,000. The decrease in advertising      
expenses for the six months ended June 30, 2001 compared with the six months    
ended June 20, 2000 reflects reduced advertising purchases, including offline   
media as well as the reduction in sales and marketing personnel. Promotion      
expenses include the costs of promotional filmed entertainment products that are
made available to customers who agree to receive notification of future         
promotions. Shipping charges on promotional filmed entertainment products are   
included in cost of sales and the related customer billings are included in     
revenues.                                                                       

 GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were approximately $569,000 for the quarter ended June 30, 2001        
compared to $1,258,000 for the quarter ended June 30, 2000. For the six months  
ended June 30, 2001 and June 30, 2000, general and administrative expenses were 
approximately $1,555,000 and $2,827,000 respectively. General and administrative
expenses include payroll and related expenses for executive, accounting and     
administrative personnel, which were approximately $342,000 and $538,000        
respectively for the quarters ended June 30, 2001 and June 30, 2000.            

    For the six months ending June 30, 2001 and June 30, 2000, payroll
related expenses were approximately $994,000 and $930,000, respectively. The    
increase in these costs is attributable to the increase in executive personnel  
costs and the cost of terminating personnel partially offset by lower           
administrative and accounting personnel costs. General and administrative       
expenses also include professional fees, which were approximately $33,000 and   
$264,000 for the quarters ended June 30, 2001 and 2000, respectively, and       
approximately $95,000 and $688,000 for the six month periods ended June 30, 2001
and 2000, respectively. The costs of facilities also decreased to approximately 
$54,000 from $204,000 for the three months ending June 30, 2001 and 2000        
respectively and to approximately $138,000 from $451,000 for the six months     
ending June 30, 2001 and 2000 respectively, reflecting the decrease in office   
space rented and related supply costs due to reduction in personnel.            

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     Transaction processing fees also decreased to approximately $18,000
from $171,000 for the quarters ended June 30, 2001 and 2000, respectively, and  
to $42,000 from $358,000 for the six months ending June 30, 2001 and 2000,      
respectively, reflecting the decrease in credit card fees as the volume of      
transactions processed decreased with the decline in orders noted above.        

 WEBSITE AND SOFTWARE DEVELOPMENT EXPENSES. Website and software
development expenses were approximately $466,000 for the quarter ended June 30, 
2001 compared to $2,324,000 for the quarter ended June 30, 2000. For the six    
months ended June 30, 2001 and 2000, website and software development expenses  
were approximately $999,000 and $4,679,000. Website and administrative expenses 
consist of systems and telecommunications services, personnel costs and related 
expenses for the design, development and management of our websites. Personnel  
costs and related expenses for the design, development and management of our    
websites totaled approximately $81,000 and $1,374,000 for the three months and  
approximately $221,000 and $3,150,000 for the six months June 30, 2001 and 2000,
respectively reflecting the decrease in the number of personnel and related     
expenses. The costs of systems and telecommunications services, totaled $349,000
and $539,000 for the three months and $732,000 and $906,000 for the six months  
ended June 30, 2001 and 2000, respectively and reflected the decreased volume of
site activity.                                                                  

         NET LOSS. BigStar's net loss was approximately $737,000 for the quarter
ended June 30, 2001, as compared to $5,156,000 for the quarter ending June 30,  
2000. For the six month periods ending June 30, 2001 and 2000, the Company's net
losses were $2,061,000 and $12,188,000, respectively. Due to the uncertainty    
regarding our future profitability, the future tax benefits of our losses have  
been fully reserved for and, therefore, no benefit for the net operating loss   
has been recorded. Under Section 382 of the Internal Revenue Code, this         
operating loss may be limited due to ownership changes.                         

LIQUIDITY AND CAPITAL RESOURCES                                                 

 Since inception, we have funded our operating cash requirements
primarily through sales of our common stock. During the quarter ended June 30,  
2000, there were no material capital transactions. For the six months ended June
30, 2000, we issued 100,943 shares of common stock upon the exercise of employee
stock options, 48,500 shares of common stock upon the exercise of warrants and  
3,692 shares of common stock under the Company's Employee Stock Purchase Plan   
for net proceeds of $353,090.                                                   

         Net cash used in operating activities for the six months ended June 30,
2001 of approximately $2,369,000 was primarily due to our net loss of           
approximately $2,061,000 and a decrease in accounts payable and accrued expenses
of $1,449,000, offset by depreciation and amortization of $422,000, net of the  
decrease in accounts receivable of $268,000 and other current and noncurrent    
assets of $321,000. Net cash used in operating activities for the six months    
ended June 30, 2000 of approximately $10,983,000 was primarily due to our net   
loss of approximately $12,188,000 offset by depreciation and amortization of    
$541,000 and non-cash common stock option and warrant expenses of $558,000, net 
of the decrease in accounts receivable of $360,000 and other current and        
noncurrent assets of $217,000.                                                  

      As of June 30, 2001 the Company had working capital of approximately
$2,531,000 compared to $3,945,000 at December 31, 2000. The decrease in working 
capital is primarily attributable to the reduction in cash and cash equivalents 
and short-term investments required to fund our operating losses. At June 30,   
2001 compared to December 31, 2000, the decreases in accounts payable and       
accrued expenses resulted primarily from the decrease in purchases of filmed    
entertainment products, advertising and promotional products over the preceding 
quarter. The decrease in accounts receivable was due to the collection of       
outstanding advertising receivables and lower sales volumes.                    

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         Net cash provided by investing activities for the six months ended June
30, 2001 of approximately $70,000 was primarily provided by the sale of computer
assets.                                                                         

       Net cash used in financing for the six months ended June 30, 2001 was
$57,142 representing the repurchase of the Company's common stock from          
ValueVision, a former major shareholder.                                        

       We currently have agreements with our principal suppliers under which
our total credit availability is $4,000,000 for the purchase of filmed          
entertainment products and related fulfillment costs, with payment terms ranging
from 30-60 days. These agreements will continue through the e-tailing referral  
arrangement with a competitor.                                                  

At June 30, 2001, BigStar's principal commitments consisted of
obligations under non-cancelable operating leases for real estate and office    
equipment. The minimum amounts payable under non-cancelable agreements was      
approximately $358,000.                                                         

     We have no material commitments for capital expenditures and do not
anticipate any significant future purchases for hardware and related software   
for enhancements of our websites during the next 12 months. We do not currently 
use derivative financial instruments.                                           

      Although we have adjusted our business model, we do not believe that
our existing cash and cash equivalent and short-term investments will be        
sufficient to meet our anticipated cash needs for working capital, operating    
losses and capital expenditures for the next 12 months. Our future liquidity and
capital requirements will depend upon numerous factors discussed under the      
section entitled "Risk Factors That May Affect Our Results of Operations and    
Financial Condition" and the future businesses that we mmay invest in. We       
believe that we will require additional financing within this time frame but    
cannot be certain that such additional funding, if needed, will be available on 
terms acceptable to us or at all.                                               

      We have suspended the e-tailing functionality of our website and are
considering terminating some or all of the current functionality, or selling the
website, or parts of it, with a view to conserving our cash and redeploying     
BigStar's remaining assets into businesses which have the potential for         
achieving profitability sooner with potentially higher returns on investment.   
BigStar may also decide to merge or sell assets to third parties in these or    
other businesses in an effort to maximize stockholder value. There can be no    
assurances that the sale of the bigstar.com site platform, or parts thereof,    
will be consummated or that efforts to conserve our cash will be successful.    
Furthermore, there may not be suitable business opportunities into which we may 
invest our remaining resources or that any such opportunity will ultimately be  
successful.                                                                     

SEASONALITY AND REVENUE FLUCTUATIONS                                            

        BigStar's limited operating history has made it difficult to ascertain
the effects of seasonality on our business other than the holiday increases     
generally experienced by most retailers. Any seasonal fluctuations in sales of  
filmed entertainment products may affect our revenues. Fluctuations in revenue  
also may result from the timing of hit releases on videocassettes and DVD.      

RISK FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION      

     The following are some but not necessarily all of the critical risk
factors associated with our business.                                           

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  We may seek to dispose of all or parts of our current e-commerce
platform. As a result of our continuing operating losses, the significant       
decline in market value of Internet-based companies, and the difficulty in      
raising additional capital for such companies, we are currently evaluating the  
disposition of all or parts of our e-commerce platform with a view to conserving
our cash and redeploying BigStar's remaining assets into businesses which have  
the potential for achieving profitability sooner with potentially higher returns
on investment. There can be no assurances that the sale of the bigstar.com      
platform or parts thereof will be consummated or that efforts to conserve our   
cash will be successful. Furthermore there may not be suitable business         
opportunities into which we may invest our remaining resources or that any such 
opportunity will be ultimately successful.                                      

   We Have a Limited Operating History and Have Incurred Significant
Losses. We commenced operations in March 1998. To date, our costs have greatly  
exceeded the revenues we have generated. As of June 30, 2001, our accumulated   
deficit was approximately $44,845,000. If we continue our present business, we  
expect that our operating expenses will continue to exceed our revenues for the 
foreseeable future. As a result, we would need to generate significantly more   
revenues to achieve profitability. We may not be able to do so. We would also   
require additional financing. We may not be able to obtain the financing or     
obtain it on terms acceptable to us. If revenues grow slower than we anticipate,
or if operating expenses exceed our expectations or cannot be reduced           
accordingly, or if we cannot obtain additional financing, our business,         
operating results and financial condition may be materially harmed.             

     We have recently been delisted from the Nasdaq National Market. The
Nasdaq National Market helps provide investors with liquidity. Without the      
liquidity and governance provided by a Nasdaq National Market listing, investors
may be reluctant to provide the Company financing that will be required to      
continue our operations.                                                        

        The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate continuation of 
the company as a going concern. We have an accumulated deficit of approximately 
$44,845,000 as of June 30, 2001. We have also incurred a loss from operations in
all periods since inception. There are also risks associated with the decision  
to suspend our e-tailing business. We have financed our operations to date      
primarily through the sale of common stock, however, we have been unsuccessful  
in raising additional funding. We may seek additional funding through public or 
private financing or other arrangements to continue our present business or     
pursue new business opportunities. Adequate funds may not be available when     
needed or may not be available on terms acceptable to us. If additional funds   
are raised by issuing equity securities, dilution to existing stockholders could
result. If funding is insufficient at any time in the future, we may be unable  
to develop or enhance our products and services, take advantage of business     
opportunities or respond to competitive pressures, any of which could have a    
material adverse effect on our business, financial condition and results of     
operations.                                                                     

      We generated substantial revenues from advertising and promotions on
our website. The online advertising market is currently very depressed and the  
traffic to our site has decreased with the reduction in our promotional         
spending. Because the online advertising market is not expected to become very  
robust in the near future, and the traffic to our site will probably not        
increase without significant advertising, it is doubtful that we will be able to
continue supplementing our sales of filmed entertainment products with          
advertising and promotional revenues. The lack of substantial advertising and   
promotional revenues could materially impact our financial conditions.          

    Our Success Depends on the Continued Growth of Online Commerce. If
online commerce does not continue to grow or be accepted or grows or is accepted
more slowly than expected, our present business will be materially harmed. A    
number of factors could slow the growth of online commerce, including the       
following:                                                                      

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         o        the network infrastructure required to support a substantially
       larger volume of transactions may not be developed;

o        government regulation may increase;                  

    o        telecommunications capacity problems may result in slower
response times; and                         

   o        consumers may have concerns about the security of online
commerce transactions.                      

We Compete with Other Online Content Providers, Retailers and 
Traditional Filmed Entertainment Retailers Who May Be More Successful than We   
Are in Attracting and Retaining Customers. The retail filmed entertainment      
industry is intensely competitive. To date, we have been unable to successfully 
compete against other retailers of filmed entertainment products; as a result,  
our business, operating results and financial condition have been materially    
harmed.                                                                         

 Many of our competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,  
marketing and other resources than we have. In addition, we believe some of our 
competitors devote substantially more resources to website and systems          
development than we do.                                                         

    We Could Experience System Failures That Interfere With Customers'
Access To Our Online Superstore. Our present business depends on the efficient  
and uninterrupted operation of our computer and communications hardware and     
software systems. Systems interruptions that cause our websites to be           
unavailable or that reduce our ability to process transactions could materially 
harm our business, operating results and financial condition. Interruptions     
could result from natural disasters as well as power loss, telecommunications   
failure and similar events. We have fully redundant systems but have not yet    
established a formal disaster recovery plan.                                    

Online Security Breaches Could Harm Our Business. To protect  
confidential information, we rely on encryption technology, which transforms    
information into a code designed to be unreadable by third parties. We also use 
authentication technology that utilizes passwords and other information to      
prevent unauthorized persons from accessing a customer's information. If a      
person circumvents our security measures, he or she could misappropriate        
confidential information about us, or our customers, or cause interruptions in  
our operations. Security breaches that result in access to confidential         
information also could damage our reputation and expose us to a risk of loss or 
liability. In addition, if we decide to continue our present business, we may be
required to make significant expenditures and expend considerable effort to try 
and protect against security breaches or remedy problems caused by these        
breaches.                                                                       

    We May Not Be Able To Protect Our Intellectual Property Rights. We
regard our trademarks, trade secrets and similar intellectual property as       
important to our success. We have applied for the registration of some of our   
trademarks and service marks in the United States. However, our efforts to      
establish and protect our intellectual property rights may be inadequate to     
prevent misappropriation or infringement of our intellectual property rights. If
we are unable to safeguard our intellectual property rights, it could materially
harm our business, operating results and financial condition.                   

        We May Infringe On The Intellectual Property Rights Of Others. We have
established a network of links with numerous small online sites. Many of the    
sites may not have licenses for the use of the intellectual property that they  

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display. The copyright holders of this intellectual property or their licensees 
may assert infringement claims against our affiliate partner sites and us       
because of our relationships with these sites.                                  

 Although we believe that our use of third-party material on our
websites is permitted under current provisions of copyright law, some aspects of
Internet content and commerce law are not clearly settled. We may therefore be  
the subject of alleged infringement claims of the trademarks and other          
intellectual property rights of third parties. If we become subject to these    
types of claims, our business could be materially harmed even if we successfully
defend against the claims. It also is possible that future legal developments   
would prohibit us from having rights to downloadable information, sound or      
video.                                                                          

        The Protection of Our Domain Names Is Uncertain Because the Regulation
of Domain Names Is Subject to Change. We currently hold various web domain names
relating to our brand, including BigStar.com, as well as domain names registered
in foreign countries. The acquisition and maintenance of domain names generally 
is regulated by governmental agencies and their designees. The regulation of    
domain names in the United States and in foreign countries is expected to change
in the near future. As a result, we may be unable to acquire or maintain        
relevant domain names in all countries in which we may conduct business. If our 
ability to acquire or maintain domain names is limited, it could materially harm
our business, operating results and financial condition.                        

     We May Be Subject to Liability for Sales and Other Taxes. We do not
collect sales or other similar taxes in most states, although we do so in New   
York, California and Illinois. Our business could be materially harmed if       
additional sales and similar taxes are imposed on us, or if penalties are       
assessed on us for past nonpayment of these taxes. Recently adopted legislation 
provides that, prior to October 2001, a state cannot impose sales taxes on      
products sold on the Internet unless these taxes could be charged on            
non-Internet transactions involving the products. During this moratorium, it is 
possible that taxing mechanisms may be developed that would, following the      
moratorium, impose increasing sales and similar tax burdens on us. If these     
burdens are placed on us, our present business could be materially harmed and   
there could be a material adverse effect on our operating results and financial 
condition.                                                                      

        Our Success Depends On Our Key Personnel. Our success is substantially
dependent on key personnel, particularly David Friedensohn, our Chief Executive 
Officer and Chairman of the Board. We are party to an employment agreement with 
David Friedensohn. The agreement provides that he will be employed as the Chief 
Executive Officer of BigStar for an unspecified period of time. Both BigStar and
Mr. Friedensohn may terminate the agreement at any time. If terminated without  
cause, Mr. Friedensohn will be entitled to severance pay equal to two years of  
his then current base salary. We have no other employment contracts with any of 
our other personnel. If Mr. Friedensohn becomes unable or unwilling to continue 
in their present positions, our business could be materially harmed.            

       We have purchased key-man life insurance in the amounts of $1,000,000
for David Friedensohn with the Company as the named beneficiary. The benefits   
received under these policies would not be sufficient to compensate the Company 
for the loss of the services of Mr. Friedensohn should suitable replacements not
be employed.                                                                    

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 PART II

 OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                      

 On June 29, 2001, First Equity Capital Securities, Inc. filed a
complaint in the Supreme Court of the State of New York, County of New York,    
alleging unpaid finders fees relating to the Company's completion of its Initial
Public Offering in 1999 and seeking damages in excess of $450,000. The Company  
believes the lawsuit is without merit and intends to vigorously defend such     
action.                                                                         

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                   

(a)      On June 5, 2001, BigStar held its Annual Meeting of Stockholders.      

(b)      Not applicable.                                                        

(c)      At the Annual Meeting, the following matter was voted upon by the      
BigStar stockholders:                                         

1.       Election of Directors                                

        The following table sets forth the name of each nominee and the voting
         with respect to each nominee for director who will serve until the 2004
Annual Meeting of Stockholders.                               

                                                      Withhold
            Nominee                  For               Authority
            -------                  ---               ---------

    Jeff Soinski                 6,037,359              52,975
    Daniel John Woods            6,037,359              52,975

ITEM 5.  EXHIBITS AND REPORTS ON FORM 8-K.                                      

(a)      List of Exhibits:                                                      

None.                                                         

(b)      Reporting on Form 8-K                                                  

              On August 10, 2001, the Company filed a current report on Form 8-K
    to disclose that the Company had changed its Independent Certified
   Public Accountants from Arthur Andersen LLP to Grant Thornton LLP
effective August 7, 2001.                                     

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the    
undersigned thereunto duly authorized.                                          

                               BIGSTAR ENTERTAINMENT, INC.

                             By: /s/ DAVID FRIEDENSOHN
                                              ----------------------------------
Dated:  August 20, 2001                       David Friedensohn,                
                                   Chief Executive Officer

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 EXHIBIT INDEX

Exhibits                                                                        

None.                                                                           

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10QSB’ Filing	Date	First	Last	Other Filings

Changed as of / Corrected on:	4/30/03
	1/1/02	9
	12/31/01	7		10-K, 10-K/A, NT 10-K
	12/15/01	9
Filed on:	8/20/01	20
	8/10/01	19		8-K
	8/8/01	1
	8/7/01	19
	7/20/01	9
	7/1/01	6	11
For Period End:	6/30/01	1	16	NT 10-Q
	6/29/01	19
	6/5/01	19		DEF 14A
	4/2/01	10		10-K
	12/31/00	2	14	10-K, 4
	6/30/00	2	14	10-Q, 3
	6/20/00	13
	1/20/00	9
				List all Filings

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Filing Submission 0001019056-01-500391 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Bigstar Entertainment Inc/NY – ‘10QSB’ for 6/30/01 – ‘10-Q’

On: Monday, 8/20/01, at 3:51pm ET · For: 6/30/01 · Accession #: 1019056-1-500391 · File #s: 0-26793 (10-Q), 0-26793 · Correction: This Filing’s metadata (e.g., “Filed as of” Date) was Corrected by the SEC on 4/30/03. ®

Previous ‘10-Q’: ‘10-Q’ on 5/14/01 for 3/31/01 · Next: ‘10-Q’ on 11/1/01 for 9/30/01 · Latest: ‘10-Q’ on 11/19/02 for 9/30/02

Quarterly Report by a Small Business — Form 10-QSBFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

On: Monday, 8/20/01, at 3:51pm ET · For: 6/30/01 · Accession #: 1019056-1-500391 · File #s: 0-26793 (10-Q), 0-26793 · Correction: This Filing’s metadata (e.g., “Filed as of” Date) was Corrected by the SEC on 4/30/03. `®`

Quarterly Report by a Small Business — Form 10-QSB
Filing Table of Contents