U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-QSB/A
(MarkOne)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended May 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act
For the transition period from __________ to __________
Commission file number 0-27664
UNIDIGITAL INC.
--------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3856672
- ------------------------------- ------------------------------------
State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
229 West 28th Street, New York, New York 10001
----------------------------------------------
(Address of Principal Executive Offices)
(212) 244-7820
---------------------------
(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
---- ----
State the number of shares outstanding of each of the Issuer's classes of
common stock, as of June 30, 1998:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 3,902,634
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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UNIDIGITAL INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.............................................1
CONSOLIDATED BALANCE SHEETS
as at May 31, 1998 (unaudited)
and August 31, 1997 (audited)........................................2
CONSOLIDATED INCOME STATEMENTS
For the Three Months and Nine
Months Ended May 31, 1998 and May 31, 1997
(unaudited)..........................................................3
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
May 31, 1998 and May 31, 1997
(unaudited)..........................................................4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)...............................................5
Item 2. Management's Discussion and Analysis or
Plan of Operation................................................11
General..........................................................11
Results of Operations............................................11
Liquidity, Capital Resources and Other Matters...................15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................17
SIGNATURES...................................................................21
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
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<PAGE>
<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
May 31, August 31,
1998 1997
-------- ------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 162,098 $ 3,202,766
Accounts receivable (less allowance for doubtful
accounts of $553,499 and $266,000 at
May 31, 1998 and August 31, 1997, respectively).............. 14,546,337 9,752,807
Deferred financing costs, net.................................. 1,107,204 463,931
Prepaid expenses............................................... 3,201,952 1,529,664
Other current assets........................................... 3,645,179 765,760
------------- -------------
Total current assets....................................... 22,662,770 15,714,928
Property and equipment, net....................................... 13,807,594 11,899,475
Intangible assets, net............................................ 27,252,774 5,330,923
Other assets...................................................... 342,123 87,964
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Total assets............................................... $ 64,065,261 $ 33,033,290
============= =============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses.......................... $ 7,258,029 $ 5,181,684
Current portion of capital lease obligations................... 2,230,281 1,998,443
Current portion of long-term debt.............................. 2,942,775 10,018,332
Income taxes payable........................................... 890,412 551,235
Loans and notes payable to stockholders........................ 168,906 154,591
------------- -------------
Total current liabilities.................................. 13,490,403 17,904,285
Capital lease obligations, net of current portion................. 3,275,900 2,875,577
Long-term debt, net of current portion............................ 32,393,333 2,127,796
Deferred income taxes............................................. 543,970 445,000
Loans and notes payable to stockholders, net of current portion... 207,495 207,496
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Total liabilities.......................................... 49,911,101 23,560,154
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STOCKHOLDERS' EQUITY
Preferred stock -- authorized 5,000,000 shares,
$.01 par value each; none issued or outstanding................ -- --
Common stock -- authorized 10,000,000 shares,
$.01 par value each; 3,902,634 and 3,243,243 shares
issued and outstanding at May 31, 1998 and
August 31, 1997, respectively.................................. 39,206 32,432
Additional paid-in capital........................................ 9,814,625 6,291,613
Retained earnings................................................. 4,237,005 3,237,984
Cumulative foreign translation adjustment......................... 63,324 (88,893)
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Total stockholders' equity................................. 14,154,160 9,473,136
------------- -------------
Total liabilities and stockholders' equity................. $ 64,065,261 $ 33,033,290
============= =============
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
(unaudited)
Three Months Ended, Nine Months Ended,
------------------- ------------------
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Net sales................................... $13,994,679 $7,664,033 $32,845,094 $18,157,668
----------- ---------- ----------- -----------
Expenses
Cost of sales............................... 7,692,922 4,239,289 17,597,651 9,624,915
Selling, general and
administrative expenses ................. 4,203,955 2,273,727 10,943,509 6,018,091
Expenses incurred due to restructuring...... 246,930 -- 246,930 --
----------- ----------- ------------ -----------
Total operating expenses.................... 12,143,807 6,513,016 28,788,090 15,643,006
----------- ----------- ----------- -----------
Income from operations...................... 1,850,872 1,151,017 4,057,004 2,514,662
Interest expense............................ 840,208 396,921 1,388,359 695,660
Interest expense - deferred financing costs. 219,583 -- 695,721 --
Interest and other expenses (income)........ 40,670 (67,175) 126,604 (60,792)
----------- ----------- ----------- ------------
Income before income taxes.................. 750,411 821,271 1,846,320 1,879,794
Provision for income taxes.................. 306,815 281,162 704,299 634,378
----------- ----------- ----------- -----------
Net income before extraordinary item........... 443,596 540,109 1,142,021 1,245,416
Extraordinary item-loss on early retirement of
debt (net of income tax benefit of $137,000) (143,000) (143,000) -- --
----------- ----------- ----------- ----------
Net income..................................... $ 300,596 $ 540,109 $ 999,021 $ 1,245,416
=========== ============ =========== ===========
Basic earnings (loss) per common share:
Earnings before extraordinary item.......... $ 0.12 $ 0.17 $ 0.34 $ 0.39
Extraordinary item.......................... (0.04) -- (0.04) --
----------- ------------ ----------- -----------
Net income.................................. $ 0.08 $ 0.17 $ 0.30 $ 0.39
=========== ============ =========== ===========
Diluted earnings (loss) per common share:
Earnings before extraordinary item.......... $ 0.11 $ 0.17 $ 0.31 $ 0.39
Extraordinary item.......................... (0.04) -- (0.04) --
----------- ------------ ----------- -----------
Net income.................................. $ 0.07 $ 0.17 $ 0.27 $ 0.39
=========== ============ =========== ===========
Shares used to compute net income per share:
Basic....................................... 3,724,459 3,228,083 3,403,721 3,203,121
=========== =========== =========== ===========
Diluted..................................... 4,036,427 3,253,163 3,640,752 3,217,789
=========== =========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
Nine Months Ended,
---------------------------
May 31, May 31,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 999,021 $ 1,245,416
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization............................ 2,684,088 1,346,217
Provision for deferred income taxes...................... 91,069 (73,530)
Provision for bad debts.................................. 31,600 77,182
Net changes in assets and liabilities net of effects of
businesses acquired:
Accounts receivable...................................... (3,272,035) (1,376,573)
Prepaid expenses and other current assets................ (3,493,771) (1,841,527)
Other assets............................................. (91,550) (6,184)
Accounts payable and accrued expenses.................... 776,256 2,004,481
Income taxes payable..................................... 316,976 181,743
----------- -----------
Net cash (used in) provided by operating activities......... (1,958,346) 1,557,225
----------- -----------
INVESTING ACTIVITIES
Additions to property and equipment......................... (836,694) (959,996)
Business acquisitions....................................... (21,245,349) (5,320,902)
----------- -----------
Net cash used in investing activities....................... (22,082,043) (6,280,898)
----------- -----------
FINANCING ACTIVITIES
Net proceeds from bank borrowings........................... 22,386,042 5,721,404
Payments of capital lease obligations....................... (1,421,939) (1,493,261)
Payments of notes for cancellation of options
and acquisition of business................................ -- (177,893)
IPO issuance costs.......................................... -- (4,214)
Stockholder loans........................................... -- 687
Common stock issued......................................... 20,134 460
----------- -----------
Net cash provided by financing activities................... 20,984,237 4,047,183
----------- -----------
Effect of foreign exchange rates on cash.................... 15,484 6,152
----------- -----------
Net decrease in cash and cash equivalents................... (3,040,668) (670,338)
Cash and cash equivalents at beginning of period............ 3,202,766 4,145,514
----------- -----------
Cash and cash equivalents at end of period.................. $ 162,098 $ 3,475,176
=========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid............................................... $ 406,943 $ 685,467
=========== ===========
Income taxes paid........................................... $ 159,443 $ 706,879
=========== ===========
Noncash transactions:
Equipment acquired under capital lease obligations.......... $ 1,310,243 $ 2,025,673
=========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE A - BASIS OF PRESENTATION:
The information presented for May 31, 1998, and for the three-month and the
nine-month periods ended May 31, 1998 and May 31, 1997, is unaudited, but, in
the opinion of the management of Unidigital Inc., its wholly-owned subsidiaries
and its and their subsidiaries, affiliated companies and predecessors
(collectively, the "Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) which the Company considers necessary for the fair presentation of the
Company's financial position as of May 31, 1998, the results of their operations
for the three-month and the nine-month periods ended May 31, 1998 and May 31,
1997 and their cash flows for the nine-month periods ended May 31, 1998 and May
31, 1997.
The consolidated financial statements included herein have been prepared by
the Company in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB and Item 310
of Regulation S-B. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended August 31, 1997, which
were included as part of the Company's Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of Unidigital
Inc. and its direct and indirect subsidiaries. All significant intercompany
balances have been eliminated.
This Form 10-QSB has been amended to reflect the correction of the impact
of an extraordinary loss related to the refinancing of certain of the Company's
debt in March 1998. The impact of such correction was to reduce net income for
the three and nine months ended May 31, 1998 by approximately $167,000. See Note
E.
Interim results are not necessarily indicative of results that may be
expected for the full fiscal year.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS:
Unidigital Inc., a Delaware corporation, is the parent holding company of
five wholly-owned operating subsidiaries, Unidigital Elements (NY), Inc.,
formerly known as LinoGraphics Corporation ("Elements (NY)"), Elements (UK)
Limited ("Elements (UK)"), Unidigital Elements (SF), Inc., formerly known as
LinoGraphics (Delaware) Corporation ("Elements (SF)"), Unison (NY), Inc.,
formerly known as Unidigital/Cardinal Corporation ("Unison (NY)") and Unison
(MA), Inc., formerly known as Unidigital/Boris Corporation ("Unison (MA)").
Elements (NY) engages in the on-demand print and digital prepress business in
New York City. Elements (UK)
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
engages in the on-demand print and digital prepress business in London. In
addition, Elements (UK) through its wholly-owned subsidiary, Regent Group
Limited, operates a financial digital print business in London. Elements (SF)
owns and operates the San Francisco on-demand prepress business and retouching
studio. Unison (NY) engages in the digital prepress and digital printing
business, and provides general printing, color separation and large format
printing services to advertising agencies and corporations primarily in the New
York City area. Unison (MA) engages in the business of digital imaging and
photographic processing in the Boston area.
FOREIGN CURRENCY TRANSLATION:
The portion of the Company's financial statements relating to the Company's
United Kingdom operations are translated into United States Dollars using
period-end exchange rates ((pound) 1.00 = $1.62 at August 31, 1997 and $1.67 at
May 31, 1998, respectively, for balance sheet accounts) and average exchange
rates ((pound) 1.00 = $1.64 for the year ended August 31, 1997; and $1.68 and
$1.64 for the three month periods ended May 31, 1998 and May 31, 1997,
respectively; and $1.68 and $1.64 for the nine month periods ended May 31, 1998
and May 31, 1997, respectively, for income statement accounts). The translation
difference is reflected as a separate component of stockholders' equity.
EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which is
required to be adopted for years ending after December 15, 1997. Accordingly,
the Company has adopted the provisions of the new statement.
The following table sets forth the computation of basic and dilutive
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
---------------------------------- --------------------------------
May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per
share-net income available for common
stockholders............................... $ 300,596 $ 540,109 $ 999,021 $ 1,245,416
=========== ============ ============ ============
Denominator:
Denominator for basic earnings per share-
weighted average shares.................... 3,724,459 3,228,083 3,403,721 3,203,121
Effect of dilutive securities:
Stock options.............................. 109,555 17,128 64,896 11,978
Warrants................................... 202,413 7,953 172,135 2,690
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share-adjusted weighted-average shares and
assumed conversions........................ 4,036,427 3,253,163 3,640,752 3,217,789
=========== =========== =========== ===========
</TABLE>
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
The following securities have been excluded from the dilutive per share
computation as they are antidilutive:
Three Months Ended, Nine Months Ended,
------------------------------------------------------
May 31, May 31,
1998 1997 1998 1997
------------------------------------------------------
Stock options............ 11,000 153,500 11,000 153,500
Warrants................. 25,000 92,000 117,000 92,000
NOTE C - STOCKHOLDERS' EQUITY:
COMMON STOCK:
As at June 30, 1998, 3,902,634 shares of common stock, $0.01 par value (the
"Common Stock"), were issued and outstanding.
PREFERRED STOCK:
As at June 30, 1998, there were no shares of preferred stock, $0.01 par
value, issued or approved for issuance.
NOTE D - STOCK OPTION PLANS:
Pursuant to the 1997 Equity Incentive Plan, as amended (the "Plan"), the
Company granted options to purchase an aggregate of 222,599 shares of its Common
Stock during the nine months ended May 31, 1998. All options were granted at
their fair market value.
Subsequent to the end of the quarter, on July 13, 1998, the Company granted
options to purchase 40,000 shares of its Common Stock to Nicholas P. Gill in
connection with his employment as the Company's Vice President, Chief Financial
Officer and Secretary. Such options were granted at their fair market value
under the Plan.
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE E - LONG TERM DEBT AND NOTES PAYABLE:
At May 31, 1998, the Company's debt consisted of the following:
<TABLE>
<CAPTION>
Facility
Amount
Amount Outstanding
-----------------------------------
August 31, May 31, August 31,
1997 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 3%; facility amount is approximately
(pound)1,145,000 ($1,969,400) $1,969,400 $ -- $1,784,150
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 2%; facility amount is approximately
(pound)2,300,000 ($3,841,000) -- 2,557,358 --
Revolving line of credit; matures April 30, 2000, interest at
Alternate Base Rate or Adjusted LIBO Rate, as defined, plus
1/4% in the United States and 2.25% in the United Kingdom 4,500,000 -- 1,725,000
Lines of credit; interest at Alternate Base Rate or Adjusted LIBO
Rate, as defined, plus 1/4% in the United States and 2.25% in
the United Kingdom 5,250,000 -- 4,110,110
Term loan; matures March 31, 2003, payable in sixteen (16)
quarterly installments ranging from $750,000 to $1,500,000,
commencing June 30, 1999, together with a balloon payment of
$7,000,000 at March 31, 2003, plus interest at the Base Rate or
at the Eurodollar Rate, as defined, plus an Applicable Margin,
as defined, ranging from 0.75% to 3.0%; facility amount is
$25,000,000 -- 25,000,000 --
Revolving line of credit; matures March 24, 2003, interest at the
Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined,ranging from 0.75% to 3.0%;
facility amount is $10,000,000 -- 6,935,000 --
Acquisition line of credit; matures March 31, 2003, payable in
eleven (11) quarterly installments of 5.0% of the outstanding
balance at March 24, 2000 commencing June 30, 2000 and one (1)
installment of 45.0% of the outstanding balance at March 24, 2000,
plus interest at the Base Rate or at the Eurodollar Rate, as defined,
plus an Applicable Margin, as defined, ranging from
0.75% to 3.0%; facility amount is $5,000,000 -- -- --
SBA loan; matures December 1, 2014, monthly payments of $3,665,
interest at prime rate plus 2.74% 350,000 -- 334,368
Installment note due seller of Elements (SF); payable in eight (8)
quarterly installments of $11,600 including interest at 6% 85,000 21,250 42,500
Loans from private investors, beginning May 1997, maturing between
May 2002 and August 2002; interest at 10% for first six months,
11% for second six months and 12% thereafter 4,000,000 -- 4,000,000
Installment note due seller of Unison (MA); matures January 15,
1999, payable in two (2) annual installments of $75,000
including interest at 8.0% 150,000 114,167 150,000
Installment note due Kwik International; matures April 15, 2001,
payable in thirty-five (35) monthly installments of $20,833.33
and one (1) installment of $20,833.45 including interest at 5.7% -- 708,333 --
---------------- ------------------
35,336,108 12,146,128
Less current portion 2,942,775 10,018,332
---------------- ------------------
$ 32,393,333 $ 2,127,796
================ ==================
</TABLE>
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
The Company has borrowing arrangements with commercial banks in both New
York and London. On March 24, 1998, the Company terminated its financing
facilities with its former New York bank and entered into borrowing arrangements
with its current New York bank (the "Bank") in the aggregate amount of
$40,000,000, which consist of a: (i) $25,000,000 term loan; (ii) $10,000,000
revolving line of credit facility which is available for working capital
purposes; and (iii) $5,000,000 credit facility which is available for corporate
acquisition purposes. Such borrowings are guaranteed by the Company's United
States subsidiaries. In addition, the Company pledged all of its equity
interests in its United States subsidiaries and two-thirds of its equity
interests in its wholly-owned United Kingdom subsidiary as collateral for such
credit facilities. Interest under such credit facilities is, at the Company's
option, at the Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to 3.0% depending on the
Company's consolidated debt to earnings ratio and the type of loan. As of May
31, 1998, the Company had an outstanding balance of $25,000,000 under the term
loan and $6,935,000 under the revolving credit facility. A portion of the
proceeds of such loans was used to repay in full promissory notes previously
issued by the Company in 1997 to certain private investors in the aggregate
principal amount of $4,000,000. In connection therewith, the Company recorded an
extraordinary loss of $143,000, net of income tax benefit of $137,000 related to
the write-off of deferred financing costs.
The credit facilities contain covenants which require the Company to
maintain certain earnings and debt to earnings ratio requirements based on the
combined operations of the Company and its subsidiaries. The credit facilities
are secured by a first priority lien on all of the assets of the Company and its
subsidiaries, a mortgage on the Company's facilities located at 545 West 45th
Street, New York, New York and a leasehold mortgage on the Company's facilities
acquired as part of the Kwik Acquisition (as defined below) located at 229 West
28th Street, New York, New York. The Company, the Bank and Richard J. Sirota
("Sirota"), the sole shareholder of Kwik (as defined below), entered into an
intercreditor subordination agreement with respect to the Bank's and Sirota's
relative interests in the Company.
The Company's agreement with the Bank restricts the Company's ability to
pay certain dividends without the Bank's prior written consent.
The Company's credit facility with its London bank provides for combined
lines of credit of (pound)2,300,000 (approximately $3,841,000) for working
capital for its United Kingdom operations. Such credit facility was increased
from (pound)1,400,000 (approximately $2,338,000) on May 13, 1998. These lines of
credit renew annually and bear interest at 2.0% over the Bank's Base Rate, as
defined. In addition, the Company is required to pay a service charge equal to
0.2% of invoice value. These lines of credit contain covenants which require the
Company's United Kingdom subsidiaries to maintain a minimum net worth of
(pound)500,000, limit borrowings up to specified amounts of accounts receivable
aged 120 days or less and are guaranteed by the Company for the principal amount
of up to (pound)500,000. Amounts outstanding are collateralized by
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
substantially all of the Company's United Kingdom assets. As of May 31, 1998,
the Company had an outstanding balance of $2,557,358 under its United Kingdom
credit facility.
NOTE F - ACQUISITION:
On March 25, 1998, the Company, through its wholly-owned subsidiary, Unison
(NY), consummated the acquisition of substantially all of the assets of Kwik
International Color, Ltd. ("Kwik") located in New York City (the "Kwik
Acquisition"). Kwik provided general printing, color separation and large format
printing services. The Company intends to continue such line of business. The
assets purchased included Kwik's entire customer list, inventory, equipment,
cash, accounts receivable and trade name. The purchase price included cash
payments of $20,590,349, issuance of a 5.7% subordinated promissory note in the
principal amount of $750,000 (payable in 36 monthly installments commencing
April 15, 1998), issuance of 649,841 shares of restricted Common Stock of the
Company and the assumption of certain trade obligations of Kwik. Of the purchase
price, $1,000,000 in cash and $1,000,000 of restricted Common Stock of the
Company (190,589 shares) is being held in escrow for a period of two years to
satisfy any indemnification claims.
The Company funded the cash portion of the purchase price from proceeds of
a $25,000,000 term loan and a $10,000,000 revolving credit loan from the Bank.
See "Note E - Bank Credit Facilities."
The following supplemental pro forma information is presented as if the
Company had completed the Kwik Acquisition as of September 1, 1997 and 1996,
respectively:
Nine Months Ended May 31,
--------------------------------------
1998 1997
--------------------------------------
Net sales........................ 41,675,406 36,257,283
Income from operations........... 4,636,498 3,216,370
Net income....................... 594,383 1,778,271
Net income per share - basic..... 0.16 0.46
Net income per share - diluted... 0.14 0.46
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
The Company provides a full range of digital prepress, four color digital
offset printing, wide format and financial printing products and services to the
New York City, San Francisco, London and Boston markets. Using advanced computer
technology, the Company provides the imaging and reproduction services required
by graphic artists and marketing professionals in connection with the creation
of printed and photographic materials for their clients. The Company's clients
include advertising agencies, publishers, corporations, government agencies,
retailers, marketing communications firms and financial institutions. The
Company's services are designed to afford graphic artists and marketing
professionals the ability to make numerous changes and enhancements in the
design and content of printed materials throughout the design and approval
process, with shorter turnaround times and at reduced costs as compared to
traditional industry methods.
The statements contained in this Quarterly Report on Form 10-QSB that are
not historical facts are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized executive officer
of the Company. These forward-looking statements, such as statements regarding
anticipated future revenues, capital expenditures, and other statements
regarding matters that are not historical facts, involve predictions. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's future
operating results include, but are not limited to: (i) economic conditions,
including economic conditions related to the digital print industry; (ii) the
availability of equipment from the Company's vendors at current prices and
levels; (iii) the intense competition in the markets for the Company's products
and services; (iv) the Company's ability to integrate acquired companies and
businesses in a cost-effective manner; (v) the Company's ability to effectively
implement its branding strategy; and (vi) the Company's ability to develop,
market, provide, and achieve market acceptance of new service offerings to new
and existing clients.
RESULTS OF OPERATIONS
The consolidated financial information includes both the Company's United
States operations and its United Kingdom operations. On April 4, 1997, the
Company consummated the acquisition of Boris Image Group, Inc. (the "Boris
Acquisition") and, on May 22, 1997, the Company consummated the acquisition of
Libra City Corporate Printing Limited (the "Libra
-11-
<PAGE>
Acquisition"). In addition, on March 25, 1998, the Company consummated the Kwik
Acquisition.
THREE MONTHS ENDED MAY 31, 1998 AND MAY 31, 1997
------------------------------------------------
NET SALES. Net sales for the three months ended May 31, 1998 ("Third
Quarter of Fiscal 1998") increased by 83%, or $6,330,646, to $13,994,679 from
$7,664,033 for the three months ended May 31, 1997 ("Third Quarter of Fiscal
1997"). Net sales for the Company's United States operations increased by 98%,
or $4,767,168, from $4,844,565 in the Third Quarter of Fiscal 1997 to $9,611,733
in the Third Quarter of Fiscal 1998. This increase was attributable primarily to
an increase in net sales resulting from the Kwik Acquisition, a full three
months of net sales resulting from the Boris Acquisition and, to a lesser
extent, an increase in net sales in each of the Company's two other United
States subsidiaries. Net sales for the Company's United Kingdom operations
increased by 55%, or $1,563,478, from $2,819,468 in the Third Quarter of Fiscal
1997 to $4,382,946 in the Third Quarter of Fiscal 1998. This increase was
attributable primarily to a full three months of net sales resulting from the
Libra Acquisition and, to a lesser extent, increases in the Company's prepress
operations.
COST OF SALES. Cost of sales for the Third Quarter of Fiscal 1998 increased
by 81%, or $3,453,633, to $7,692,922 from $4,239,289 for the Third Quarter of
Fiscal 1997. As a percentage of net sales, cost of sales remained constant at
55% for the Third Quarter of Fiscal 1997 and the Third Quarter of Fiscal 1998.
Cost of sales for the Company's United States operations decreased as a
percentage of net sales from 55% for the Third Quarter of Fiscal 1997 to 51% for
the Third Quarter of Fiscal 1998. Such decrease was attributable primarily to
the change in product mix in the Company's United States operations to include
more digital prepress services as a result of the Kwik Acquisition. Cost of
sales for the Company's United Kingdom operations increased as a percentage of
net sales from 56% for the Third Quarter of Fiscal 1997 to 63% for the Third
Quarter of Fiscal 1998. Such increase was attributable primarily to the change
in product mix in the Company's United Kingdom operations to include more
digital print and financial print services. Digital print and financial print
services have higher costs compared to digital prepress services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased by 85%, or $1,930,228, from
$2,273,727 for the Third Quarter of Fiscal 1997 to $4,203,955 for the Third
Quarter of Fiscal 1998. Such increase was attributable primarily to the
increased level of operations which resulted from the Kwik Acquisition and a
full three months of operations which resulted from each of the Boris
Acquisition and the Libra Acquisition. As a percentage of net sales, SG&A
remained constant at 30% for the Third Quarter of Fiscal 1997 and the Third
Quarter of Fiscal 1998.
RESTRUCTURING EXPENSES. In connection with the Kwik Acquisition, the
Company has consolidated its New York operations. As a result of such
consolidation, the Company incurred restructuring expenses of $246,930.
INCOME FROM OPERATIONS. Income from operations for the Third Quarter of
Fiscal 1998 increased by 61%, or $699,855, to $1,850,872 from $1,151,017 for the
Third Quarter of Fiscal
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<PAGE>
1997. Of this amount, $1,474,418 was contributed by the Company's United States
operations and $376,454 by the Company's United Kingdom operations. This
increase resulted from higher net sales in both the Company's United States and
United Kingdom operations.
NET INTEREST EXPENSE. Net interest expense for the Third Quarter of Fiscal
1998 increased by 234%, or $770,715, to $1,100,461 from $329,746 for the Third
Quarter of Fiscal 1997. This increase resulted from increased borrowings under
the Company's credit facilities and capital leases assumed by the Company as
part of the Kwik Acquisition, the Boris Acquisition and the Libra Acquisition.
In addition, the Company incurred deferred financing costs of $219,583, and of
such deferred financing costs, $138,000 are non-cash, non-recurring expenses.
INCOME TAXES. Income taxes for the Third Quarter of Fiscal 1998 increased
by 9%, or $25,653, to $306,815 from $281,162 for the Third Quarter of Fiscal
1997.
EXTRAORDINARY ITEM. In connection with the prepayment of $4,000,000 of
loans from private investors, the Company recorded an extraordinary loss of
$143,000, net of income tax benefit of $137,000 related to the write-off of
deferred financing costs.
NET INCOME. As a result of the factors described above, net income for the
Third Quarter of Fiscal 1998 decreased by 44%, or $239,513, to $300,596 as
compared to a net income of $540,109 for the Third Quarter of Fiscal 1997.
NINE MONTHS ENDED MAY 31, 1998 AND MAY 31, 1997
-----------------------------------------------
NET SALES. Net sales for the nine months ended May 31, 1998 increased by
81%, or $14,687,426, to $32,845,094 from $18,157,668 for the nine months ended
May 31, 1997. Net sales for the Company's United States operations increased by
78%, or $8,621,664, from $11,089,871 in the nine months ended May 31, 1997 to
$19,711,535 in the nine months ended May 31, 1998. This increase was
attributable primarily to an increase in net sales resulting from the Boris
Acquisition, the Kwik Acquisition and, to a lesser extent, an increase in net
sales in each of the Company's two other United States subsidiaries. Net sales
for the Company's United Kingdom operations increased by 86%, or $6,065,762,
from $7,067,797 in the nine months ended May 31, 1997 to $13,133,559 in the nine
months ended May 31, 1998. This increase was attributable primarily to the
inclusion of net sales from the Libra Acquisition and, to a lesser extent,
increases in the Company's prepress operations.
COST OF SALES. Cost of sales for the nine months ended May 31, 1998
increased by 83%, or $7,972,736, to 17,597,651 from $9,624,915 for the nine
months ended May 31, 1997. As a percentage of net sales, cost of sales increased
slightly from 53% for the nine months ended May 31, 1997 to 54% for the nine
months ended May 31, 1998. Cost of sales for the Company's United States
operations decreased as a percentage of net sales from 51% for the nine months
ended May 31, 1997 to 49% for the nine months ended May 31, 1998. Such decrease
was attributable primarily to the change in product mix in the Company's United
States operations to include more digital prepress services as a result of the
Kwik Acquisition and, to a lesser extent, to the Company's renegotiation of its
vendor contracts resulting in reduced supply costs to the Company. Cost of sales
for the Company's United Kingdom operations increased as a
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<PAGE>
percentage of net sales from 57% for the nine months ended May 31, 1997 to 61%
for the nine months ended May 31, 1998. Such increase was attributable primarily
to the change in product mix in the Company's United Kingdom operations to
include more digital print and financial print services. Digital print and
financial print services have higher costs compared to digital prepress
services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased by 82%, or
$4,925,418, from $6,018,091 for the nine months ended May 31, 1997 to
$10,943,509 for the nine months ended May 31, 1998. Such increase was
attributable primarily to the increased level of operations which resulted from
the Kwik Acquisition, the Boris Acquisition and the Libra Acquisition, and, to a
lesser extent, the hiring of additional management and administrative personnel
and costs associated with the Company's acquisitions. As a percentage of net
sales, SG&A remained constant at 33% for the nine months ended May 31, 1997 and
for the nine months ended May 31, 1998.
RESTRUCTURING EXPENSES. In connection with the Kwik Acquisition, the
Company has consolidated its New York operations. As a result of such
consolidation, the Company incurred restructuring expenses of $246,930.
INCOME FROM OPERATIONS. Income from operations for the nine months ended
May 31, 1998 increased by 61%, or $1,542,342, to $4,057,004 from $2,514,662 for
the nine months ended May 31, 1997. Of this amount, $2,479,649 was contributed
by the Company's United States operations and $1,577,355 by the Company's United
Kingdom operations. This increase resulted from higher net sales and reduced
supply costs offset in part by higher production costs associated with the
changing product mix of the Company's operations to include more digital print
and financial print services.
NET INTEREST EXPENSE. Net interest expense for the nine months ended May
31, 1998 increased by 248%, or $1,575,816, to $2,210,684 from $634,868 for the
nine months ended May 31, 1997. This increase resulted from increased borrowings
under the Company's credit facilities and capital leases assumed by the Company
as part of the Kwik Acquisition, the Boris Acquisition and the Libra
Acquisition. In addition, the Company incurred deferred financing costs of
$695,721, and of such deferred financing costs, $414,000 are non-cash,
non-recurring expenses.
INCOME TAXES. Income taxes for the nine months ended May 31, 1998 increased
by 11%, or $69,921, to $704,299 from $634,378 for the nine months ended May 31,
1997.
EXTRAORDINARY ITEM. In connection with the prepayment of $4,000,000 of
loans from private investors, the Company recorded an extraordinary loss of
$143,000, net of income tax benefit of $137,000 related to the write-off of
deferred financing costs.
NET INCOME. As a result of the factors described above, net income for the
nine months ended May 31, 1998 decreased by 20%, or $246,395, to $999,021 as
compared to a net income of $1,245,416 for the nine months ended May 31, 1997.
-14-
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
CASH FLOW. Net cash used in operations was $1,958,346 for the first nine
months of fiscal 1998. Net cash provided by operations was $1,557,225 for the
first nine months of fiscal 1997. Net cash used in investing activities for the
acquisition of property and equipment was $836,694 for the first nine months of
fiscal 1998 and $959,996 for the first nine months of fiscal 1997. For the first
nine months of fiscal 1998 and fiscal 1997, the Company acquired equipment under
capital leases of $1,310,243 and $2,025,673, respectively, and made payments
under capital leases of $1,421,939 and $1,493,261, respectively. Net bank
borrowings provided funds of $22,386,042 and $5,721,404 for the first nine
months of fiscal 1998 and fiscal 1997, respectively.
BANK CREDIT FACILITIES. The Company has borrowing arrangements with
commercial banks in both New York and London. On March 24, 1998, the Company
terminated its financing facilities with its former New York bank and entered
into borrowing arrangements with the Bank in the aggregate amount of
$40,000,000, which consist of a: (i) $25,000,000 term loan; (ii) $10,000,000
revolving line of credit facility which is available for working capital
purposes; and (iii) $5,000,000 credit facility which is available for corporate
acquisition purposes. Such borrowings are guaranteed by the Company's United
States subsidiaries. In addition, the Company pledged all of its equity
interests in its United States subsidiaries and two-thirds of its equity
interests in its wholly-owned United Kingdom subsidiary as collateral for such
credit facilities. Interest under such credit facilities is, at the Company's
option, at the Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to 3.0% depending on the
Company's consolidated debt to earnings ratio and the type of loan. As of May
31, 1998, the Company had an outstanding balance of $25,000,000 under the term
loan and $6,935,000 under the revolving credit facility. A portion of the
proceeds of such loans was used to repay in full promissory notes previously
issued by the Company in 1997 to certain private investors in the aggregate
principal amount of $4,000,000. In connection therewith, the Company recorded an
extraordinary loss of $143,000, net of income tax benefit of $137,000 related to
the write-off of deferred financing costs.
The credit facilities contain covenants which require the Company to
maintain certain earnings and debt to earnings ratio requirements based on the
combined operations of the Company and its subsidiaries. The credit facilities
are secured by a first priority lien on all of the assets of the Company and its
subsidiaries, a mortgage on the Company's facilities located at 545 West 45th
Street, New York, New York and a leasehold mortgage on the Company's facilities
acquired as part of the Kwik Acquisition located at 229 West 28th Street, New
York, New York. The Company, the Bank and Sirota entered into an intercreditor
subordination agreement with respect to the Bank's and Sirota's relative
interests in the Company.
The Company's agreement with the Bank restricts the Company's ability to
pay certain dividends without the Bank's prior written consent.
The Company's credit facility with its London bank provides for combined
lines of credit of (pound)2,300,000 (approximately $3,841,000) for working
capital for its United Kingdom
-15-
<PAGE>
operations. Such credit facility was increased from (pound)1,400,000
(approximately $2,338,000) on May 13, 1998. These lines of credit renew annually
and bear interest at 2.0% over the Bank's Base Rate, as defined. In addition,
the Company is required to pay a service charge equal to 0.2% of invoice value.
These lines of credit contain covenants which require the Company's United
Kingdom subsidiaries to maintain a minimum net worth of (pound)500,000, limit
borrowings up to specified amounts of accounts receivable aged 120 days or less
and are guaranteed by Unidigital for the principal amount of up to
(pound)500,000. Amounts outstanding are collateralized by substantially all of
the Company's United Kingdom assets. As of May 31, 1998, the Company had an
outstanding balance of $2,557,358 under its United Kingdom credit facility.
The Company expects that anticipated cash flow from operations and
available borrowings will be sufficient to fund its capital lease obligations,
debt service payments, potential earn-outs, capital expenditures and operations
for at least 12 months. The Company may require additional financing to
consummate future acquisitions. There can be no assurance that the Company will
be able to secure such additional financing on terms favorable to the Company.
WORKING CAPITAL. The Company's working capital at May 31, 1998 was
$9,172,367 compared to a working capital deficit of 2,189,357 at August 31,
1997.
ACQUISITION. On March 25, 1998, the Company, through its wholly-owned
subsidiary, Unison (NY), consummated the Kwik Acquisition. The purchase price
included cash payments of $20,590,349, issuance of a 5.7% subordinated
promissory note in the principal amount of $750,000 (payable in 36 monthly
installments commencing April 15, 1998), issuance of 649,841 shares of
restricted Common Stock of the Company and the assumption of certain trade
obligations of Kwik. Of the purchase price, $1,000,000 in cash and $1,000,000 of
restricted Common Stock of the Company (190,589 shares) is being held in escrow
for a period of two years to satisfy any indemnification claims.
The Company funded the cash portion of the purchase price from proceeds of
a $25,000,000 term loan and a $10,000,000 revolving credit loan from the Bank.
INFLATION, FOREIGN CURRENCY FLUCTUATIONS AND INTEREST RATE CHANGES.
Although the Company cannot accurately determine the precise effect thereof on
its operations, it does not believe inflation, currency fluctuations or interest
rate changes have historically had a material effect on revenues, sales or
results of operations. Inflation, currency fluctuations and changes in interest
rates have, however, at various times, had significant effects on the economies
of the United States and the United Kingdom and could adversely impact the
Company's revenues, sales and results of operations in the future. If there is a
material adverse change in the relationship between the Pound Sterling and the
United States Dollar, such change would adversely affect the results of the
Company's United Kingdom operations as reflected in the Company's financial
statements. The Company has not hedged its exposure with respect to this
currency risk, and does not expect to do so in the future, since it does not
believe that it is practicable for it to do so at a reasonable cost.
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<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
4.1 Stockholders' Agreement dated as of March 25, 1998 by and
among Unidigital Inc., William E. Dye and Richard J. Sirota
(included as an exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and incorporated by
reference herein).
10.1 Asset Purchase Agreement dated as of March 25, 1998 by and
among Unidigital Inc., Unison (NY), Inc., Kwik International
Color, Ltd. and Richard J. Sirota (included as an exhibit to
the Current Report on Form 8-K of the Company dated April 8,
1998 and incorporated by reference herein).
10.2 Subordinated Promissory Note dated March 25, 1998 of
Unidigital Inc. payable to Kwik International Color, Ltd. in
the principal amount of $750,000 (included as an exhibit to
the Current Report on Form 8-K of the Company dated April 8,
1998 and incorporated by reference herein).
10.3 Employment Agreement dated as of March 25, 1998 by and
between Unidigital Inc. and Richard J. Sirota (included as
an exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
10.4 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik
International Color, Ltd. for the property located at 229 W.
28th Street, New York, New York, on the fourth floor, known
as Room 401-405 (included as an exhibit to the Current
Report on Form 8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.5 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik
International Color, Ltd. for the property located at 229 W.
28th Street, New York, New York, on the seventh floor, known
as Room 706-714 and 707-713 (included as an exhibit to the
Current Report on Form 8-K of the Company dated April 8,
1998 and incorporated by reference herein).
10.6 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik
International Color, Ltd. for the property located at 229 W.
28th Street, New York, New York, on the eighth floor
(included as an
-17-
<PAGE>
exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
10.7 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik
International Color, Ltd. for the property located at 229 W.
28th Street, New York, New York, on the ninth floor
(included as an exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and incorporated by
reference herein).
10.8 Credit Agreement dated as of March 24, 1998 by and among
Unidigital Inc., the lenders from time to time parties
thereto and Canadian Imperial Bank of Commerce (included as
an exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
10.9 Term Note dated March 24, 1998 of Unidigital Inc. payable to
Canadian Imperial Bank of Commerce in the principal amount
of $25,000,000 (included as an exhibit to the Current Report
on Form 8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.10 Acquisition Note dated March 24, 1998 of Unidigital Inc.
payable to Canadian Imperial Bank of Commerce in the
principal amount of $5,000,000 (included as an exhibit to
the Current Report on Form 8-K of the Company dated April 8,
1998 and incorporated by reference herein).
10.11 Revolving Credit Note dated March 24, 1998 of Unidigital
Inc. payable to Canadian Imperial Bank of Commerce in the
principal amount of $10,000,000 (included as an exhibit to
the Current Report on Form 8-K of the Company dated April 8,
1998 and incorporated by reference herein).
10.12 Stock Pledge Agreement (U.S.) dated as of March 24, 1998
made by Unidigital Inc. in favor of Canadian Imperial Bank
of Commerce (included as an exhibit to the Current Report on
Form 8-K of the Company dated April 8, 1998 and incorporated
by reference herein).
10.13 Mortgage dated as of March 24, 1998 made by Unidigital Inc.
in favor of Canadian Imperial Bank of Commerce (included as
an exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
10.14 Security Agreement dated as of March 24, 1998 made by
Unidigital Inc. in favor of Canadian Imperial Bank of
Commerce
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<PAGE>
(included as an exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and incorporated by
reference herein).
10.15 Subsidiaries Guarantee dated as of March 24, 1998 made by
each of Unidigital Elements (NY), Inc., Unidigital Elements
(SF), Inc., Unison (NY), Inc. and Unison (MA), Inc., in
favor of Canadian Imperial Bank of Commerce (included as an
exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
10.16 Intercreditor and Subordination Agreement dated as of March
25, 1998 by and among Kwik International Color, Ltd.,
Unidigital Inc. and Canadian Imperial Bank of Commerce
(included as an exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and incorporated by
reference herein).
10.17 Mortgage, Assignment of Leases and Rents and Security
Agreement dated as of March 24, 1998 between Unidigital Inc.
and Canadian Imperial Bank of Commerce (included as an
exhibit to the Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by reference herein).
27.1 Restated Financial Data Schedule for the period ended May
31, 1998.
27.2 Restated Financial Data Schedule for the period ended
November 30, 1997 (included as an exhibit to the Company's
Quarterly Report on Form 10-QSB for the quarter ended May
31, 1998).
27.3 Restated Financial Data Schedule for the year ended August
31, 1997 (included as an exhibit to the Company's Quarterly
Report on Form 10-QSB for the quarter ended May 31, 1998).
27.4 Restated Financial Data Schedule for the period ended May
31, 1997 (included as an exhibit to the Company's Quarterly
Report on Form 10-QSB for the quarter ended May 31, 1998).
27.5 Restated Financial Data Schedule for the period ended
February 28, 1997 (included as an exhibit to the Company's
Quarterly Report on Form 10-QSB for the quarter ended May
31, 1998).
27.6 Restated Financial Data Schedule for the period ended
November 30, 1996 (included as an exhibit to the Company's
Quarterly Report on Form 10-QSB for the quarter ended May
31, 1998).
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<PAGE>
27.7 Restated Financial Data Schedule for the year ended August
31, 1996 (included as an exhibit to the Company's Quarterly
Report on Form 10-QSB for the quarter ended May 31, 1998).
(b) Reports on Form 8-K.
On April 8, 1998, the Company filed a Current Report on Form
8-K with the Securities and Exchange Commission relating to the
Kwik Acquisition. Such Form 8-K also disclosed the terms of
certain loans made to the Company, the proceeds of which the
Company used to fund the purchase price of the Kwik Acquisition.
Subsequent to the end of the quarter, on June 8, 1998, the
Company filed a Current Report on Form 8-K/A containing required
financial statements and pro forma information relating to the
Kwik Acquisition disclosed in its Current Report on Form 8-K
filed on April 8, 1998.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNIDIGITAL INC.
DATE: December 4, 1998 By: /s/William E. Dye
-----------------------------------
William E. Dye,
Chief Executive Officer
(Principal Executive, Financial
and Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated fiancial statements at May 31, 1998 and for the nine
month perid ended May 31, 1998 is qualified in its entirety by reference to such
financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1998
<EXCHANGE-RATE> 1
<CASH> 162,098
<SECURITIES> 0
<RECEIVABLES> 15,099,836
<ALLOWANCES> (553,499)
<INVENTORY> 0
<CURRENT-ASSETS> 7,954,335
<PP&E> 24,125,494
<DEPRECIATION> (10,317,899)
<TOTAL-ASSETS> 64,065,261
<CURRENT-LIABILITIES> 13,490,403
<BONDS> 0
0
0
<COMMON> 39,206
<OTHER-SE> 9,814,625
<TOTAL-LIABILITY-AND-EQUITY> 64,065,261
<SALES> 32,845,094
<TOTAL-REVENUES> 32,845,094
<CGS> 17,597,651
<TOTAL-COSTS> 17,597,651
<OTHER-EXPENSES> 10,943,509
<LOSS-PROVISION> 95,384
<INTEREST-EXPENSE> 2,210,684
<INCOME-PRETAX> 1,846,320
<INCOME-TAX> 704,299
<INCOME-CONTINUING> 1,142,021
<DISCONTINUED> 0
<EXTRAORDINARY> (143,000)
<CHANGES> 0
<NET-INCOME> 999,021
<EPS-PRIMARY> 0.30<F1>
<EPS-DILUTED> 0.27<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnings per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>