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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 000-29642
FILM ROMAN, INC.
(Exact name of registrant as specified in charter)
DELAWARE 95-4585357
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
12020 CHANDLER BOULEVARD, SUITE 200
NORTH HOLLYWOOD, CALIFORNIA 91607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 761-2544
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 at least the past 90 days. YES [ ] NO [X].
APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES [ ] NO [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of November 13, 1996, 8,446,690 shares of common stock, par value $.01
per share, and were outstanding.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................. 3
Balance Sheets as of December 31, 1995 and September 30,
1996 (unaudited).............................................. 3
Statements of Operations for the Three and Nine Months Ended
September 30, 1995 and September 30, 1996 (unaudited)......... 4
Statements of Cash Flows for the Nine Months Ended
September 30, 1995 and September 30, 1996 (unaudited)......... 5
Notes to Financial Statements.................................. 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 8
Signatures................................................................. S-1
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FILM ROMAN, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,176,090 $ 3,403,895
Accounts receivable 430,184 677,539
Film costs, net of accumulated amortization of $118,316,120 (1995)
and $141,488,303 (1996) 12,379,146 27,819,482
Property and equipment, net of accumulated depreciation and amortization
of $549,028 (1995) and $725,941 (1996) 336,875 831,156
Refundable income taxes 487,500 155,000
Deposits and other assets 140,583 742,732
----------- -----------
Total Assets $18,950,378 $33,629,804
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 508,433 $ 3,153,135
Accrued expenses 682,183 1,482,197
Dividends payable 650,000 1,820,000
Debt 1,737,145 1,230,000
Deferred revenue 6,791,779 19,160,717
----------- -----------
Total liabilities 10,369,540 26,846,049
Class A Redeemable Preferred Stock, $.01 par value, 1,200,000 shares
authorized, issued and outstanding, $12,000,000 liquidation preference 6,748,788 7,474,400
Stockholder's equity (deficiency)
Class B Convertible Preferred stock, $.01 par value, 750,000
shares authorized, issued and outstanding, $7,500,000 liquidation
preference 300 300
Common stock, no par value, 10,000,000 shares authorized,
2,141,250 shares issued and outstanding in 1995 and 1996 700 700
Additional paid-in capital 4,716,656 4,941,656
Accumulated deficit (2,885,606) (5,633,301)
----------- -----------
Total stockholder's equity (deficiency) 1,832,050 (690,645)
----------- -----------
Total liabilities and stockholder's equity (deficiency) $18,950,378 $33,629,804
=========== ===========
</TABLE>
See accompanying notes.
3
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FILM ROMAN, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 7,552,898 $11,108,312 $20,911,652 $24,824,010
Cost of Revenue 7,578,225 10,245,746 20,191,137 23,172,800
Selling, general and
administrative expenses 902,163 1,002,187 2,080,494 2,596,659
----------- ----------- ----------- -----------
Operating loss (927,490) (139,621) (1,359,979) (945,449)
Interest income 39,971 39,618 40,069 136,041
Interest expense (16,158) (8,279) (42,643) (41,045)
----------- ----------- ----------- -----------
Loss before provision for
income taxes (903,677) (108,282) (1,362,553) (850,453)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (903,677) $ (108,282) $(1,362,553) $ (850,453)
=========== =========== =========== ===========
Net loss $ (903,677) $ (108,282) $(1,362,553) $ (850,453)
Accretion of the difference
between the carrying value
and the liquidation value of
the Class A Redeemable
Preferred Stock (242,415) (242,415) (242,415) (727,245)
Class A Redeemable
Preferred Stock Dividend (160,000) (240,000) (160,000) (720,000)
----------- ----------- ----------- -----------
Net loss attributable to
common stock $(1,306,092) $ (590,697) $(1,764,968) $(2,297,698)
=========== =========== =========== ===========
Net loss per share $ (0.27) $ (0.12) $ (0.37) $ (0.48)
=========== =========== =========== ===========
Weighted average number of
shares outstanding 4,824,519 4,824,519 4,824,519 4,824,519
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
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STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,362,553) $ (850,453)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 80,100 176,914
Amortization of film costs 20,636,474 23,172,183
Compensation expense in connection with the issuance of 242,400 -
common stock options to an employee
Issuance of New Warrants - 225,000
Changes in operating assets and liabilities:
Accounts receivable 197,180 (247,355)
Film costs (24,518,489) (38,612,519)
Refundable income taxes (487,500) 332,500
Deposits and other assets 43,129 (602,149)
Accounts payable 818,515 2,644,702
Accrued expenses (311,640) 800,014
Deferred revenue 2,352,876 12,368,938
------------ ------------
Net cash used in operating activities (2,309,508) (592,225)
INVESTING ACTIVITIES:
Additions to property and equipment (127,878) (671,195)
------------ ------------
Net cash used in investing activities (127,878) (671,195)
FINANCING ACTIVITIES:
Proceeds from issuance of Class A Preferred Stock and 10,984,220 (1,628)
Warrants, net of issuance costs
Borrowings under debt 3,756,826 4,660,000
Repayments on debt (3,581,755) (5,167,147)
Dividends declared and paid to common stockholder (1,751,500) -
------------ ------------
Net cash provided by (used in) financing activities 9,407,791 (508,775)
Net increase (decrease) in cash 6,970,405 (1,772,195)
------------ ------------
Cash and cash equivalents at beginning of period 435,580 5,176,090
Cash and cash equivalents at end of period $ 7,405,985 $ 3,403,895
============ ============
Supplemental disclosure of cash flow information: $ 42,643 $ 41,045
Cash paid during the period for: ------------ ------------
Interest
Income taxes $ - $ -
------------ ------------
</TABLE>
Supplemental disclosure of non-cash financing activities:
For the nine months ended September 30, 1995 and 1996, the Company accrued
dividends of $160,000 and $720,000, respectively, on the outstanding shares of
its Class A Redeemable Preferred Stock and $100,000 and $450,000, respectively,
on the outstanding shares of its Class B Convertible Preferred Stock. In
addition, the Company recorded accretion of the difference between the carrying
value and the liquidation value of $242,415 and $727,245, respectively, on the
outstanding shares of its Class A Redeemable Preferred Stock.
See accompanying notes.
5
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FILM ROMAN, INC.
NOTES TO FINANCIAL STATEMENTS
(1) - BASIS OF PRESENTATION
Film Roman, Inc., a Delaware corporation (the "Company"), was
incorporated in May 1996 in order to hold all of the outstanding stock of Film
Roman, Inc., a California corporation ("Film Roman California"), following a
Reorganization as described in Note 2 below. The Company currently conducts all
of its operations through its wholly owned subsidiary Film Roman California.
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
only of normal recurring accruals necessary to present fairly the financial
position of the Company as of September 30, 1996 and the results of its
operations for the three and nine months ended September 30, 1995 and 1996 and
the cash flows for the nine months ended September 30, 1995 and 1996 have been
included. The results of operations for interim periods are not necessarily
indicative of the results which may be realized for the full year. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Form S-1 registration statement (No. 333-03987) filed with the
Securities and Exchange Commission.
(2) - REORGANIZATION AND INITIAL PUBLIC OFFERING
On October 3, 1996, the Company effected a reorganization (the
"Reorganization") pursuant to which (i) Film Roman California merged with and
into a wholly owned subsidiary of the Company; (ii) each outstanding share of
common stock of Film Roman California ("California Common Stock") was converted
into 1.25 shares of common stock of the Company, $.01 par value ("Common Stock")
(including shares of California Common Stock issued immediately prior to such
merger upon the "cashless" exercise of certain warrants and upon conversion of
all outstanding shares of Class B Convertible Preferred Stock); (iii) each
outstanding share of Class A Redeemable Preferred Stock was converted into one
share of redeemable preferred stock of the Company, $.01 par value ("Redeemable
Preferred Stock"); (iv) all outstanding employee options and certain warrants
for the purchase of Common Stock, pursuant to the anti-dilution provisions
thereof, became options and warrants to purchase Common Stock (with options and
warrants to purchase each share of California Common Stock becoming options and
warrants to purchase 1.25 shares of Common Stock at 80% of the exercise price
theretofore applicable); and (v) a warrant issued to the President of the
Company for the purchase of 185,000 shares of California Common Stock was
cancelled. As a result of the foregoing, Film Roman California became a wholly
owned subsidiary of the Company, and the stockholders of Film Roman California
became stockholders of the Company. The Reorganization was effected pursuant to
an Plan of Reorganization Agreement dated as of May 15, 1996, as amended, by and
among the Company, Film Roman California and the stockholders of Film Roman
California.
On October 4, 1996, the Company completed its initial public offering
("Offering") of 3,300,000 shares of its Common Stock. Of the 3,300,000 shares
of Common Stock sold in the Offering, 3,275,364 shares were issued and sold by
the Company and 24,636 shares were sold by certain stockholders of the Company.
Net proceeds to the Company pursuant to the Offering totalled approximately
$29.3 million, after deducting underwriting discounts and offering expenses
payable by the Company.
Immediately following the closing of the Offering, the Company
redeemed for cash $7.5 million liquidation preference of Redeemable Preferred
Stock. The shares of Redeemable Preferred Stock that were not redeemed for cash
were redeemed for Common Stock (at a redemption price of 1.3072 shares of
6
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Common Stock for each share of Redeemable Preferred Stock) and, as a result,
586,690 shares of Common Stock were issued upon such redemption on October 30,
1996.
(3) - NET LOSS PER COMMON SHARE
The per share data is based on the weighted average number of common
and common equivalent shares outstanding during the period and are calculated in
accordance with a Staff Accounting Bulletin of the Securities and Exchange
Commission whereby common and common share equivalents issued within a 12-month
period prior to an initial public offering are treated as outstanding for all
periods presented if the issue price was less than the proposed initial public
offering price. In addition, shares issuable upon the exercise of options and
warrants and convertible preferred stock within the 12-month period are
considered to have been outstanding since inception of the Company. For the
three and nine months ended September 30, 1996, the net loss per Common Share
gives effect to the accretion of the difference between the carrying value and
the liquidation value of the Class A Redeemable Preferred Stock of $242,415 and
$727,245, respectively, and to the accrual of dividends of 240,000 and $720,000,
respectively, on the Class A Redeemable Preferred Stock.
For the three and nine months ended September 30, 1995, the net loss
per Common Share gives effect to the accretion of the difference between the
carrying value and the liquidation value of the Class A Redeemable Preferred
Stock of $242,415 and to dividends of $160,000 on the Class A Redeemable
Preferred Stock.
The per share data does not give effect to the shares issued in the
Offering as such event occurred subsequent to September 30, 1996.
(4) - FILM COSTS
The components of unamortized film costs consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 30, AS OF SEPTEMBER 30,
1995 1996 (UNAUDITED)
------------------ -------------------
<S> <C> <C>
Animated film productions released, $ 5,391,275 $ 4,656,502
less amortization
Animated film productions in process 6,253,597 22,004,121
Animated film productions in development 734,274 1,158,859
----------- -----------
$12,379,146 $27,819,482
=========== ===========
</TABLE>
(5) 1996 COMMITMENT
In September 1996, Film Roman California secured a commitment (the
"Commitment") from certain of its existing stockholders to purchase up to $3.0
million of its 12% Senior Secured Notes due December 20, 1996 ("Senior Notes").
No Senior Notes have been or will be issued. As consideration for the receipt of
the Commitment, Film Roman California issued certain warrants which, in
connection with the Reorganization and pursuant to the anti-dilution provisions
thereof, became warrants for the purchase of 72,066 shares of Common Stock at an
exercise price of $7.00 per share. The New Warrants are exercisable beginning
September 1997 and expire in September 2001. The New Warrants will be
immediately exercisable upon a merger or consolidation involving the Company
(other than the Reorganization) or in the event of a sale of all or
substantially all of the assets of the Company. During the three months ended
September 30, 1996, the Company recorded an expense of $225,000 relating to the
issuance of the New Warrants and transactions costs associated with the
Commitment.
7
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11 Statement regarding computation of earnings per share.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1996.
8
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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.
Dated: June 17, 1997
FILM ROMAN, INC.
By: /s/ Phil Roman
--------------
Phil Roman
President, Chief Executive Officer and Director
By: /s/ Greg Arsenault
------------------
Greg Arsenault
Senior Vice President - Finance and Administration
S-1
<PAGE>
EXHIBIT 11
EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding............................ 2,141,250 2,141,250 2,141,250 2,141,250
Incremental effect of issuance of
Convertible Preferred Stock within
one year prior to an initial public
offering at a price below the
offering price (i.e. cheap stock)...... 937,500 937,500 937,500 937,500
Incremental effect of issuance of
warrants and options within one
year prior to an initial public
offering with an exercise price
below the offering price (i.e. cheap
stock) based on the treasury stock
method using the offering price........ 1,745,769 1,745,769 1,745,769 1,745,769
----------- ---------- ----------- -----------
4,824,519 4,824,519 4,824,519 4,824,519
=========== ========== =========== ===========
Net loss attributable to common
stock.................................. $(1,306,092) $ (590,697) $(1,764,968) $(2,297,698)
=========== ========== =========== ===========
Net loss per share...................... $ (0.27) $ (0.12) $ (0.37) $ (0.48)
=========== ========== =========== ===========
</TABLE>
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF FILM ROMAN, INC., AS OF AND FOR THE THREE
MONTH AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 3,403,895 3,403,895
<SECURITIES> 0 0
<RECEIVABLES> 677,538 677,538
<ALLOWANCES> 0 0
<INVENTORY> 27,819,482 27,819,482
<CURRENT-ASSETS> 0 0
<PP&E> 1,557,097 1,557,097
<DEPRECIATION> 725,941 725,941
<TOTAL-ASSETS> 23,629,804 23,629,804
<CURRENT-LIABILITIES> 0 0
<BONDS> 1,230,000 1,230,000
0 0
7,474,400 7,474,400
<COMMON> 700 700
<OTHER-SE> (691,345) (691,345)
<TOTAL-LIABILITY-AND-EQUITY> 33,629,804 33,629,804
<SALES> 11,108,312 24,824,010
<TOTAL-REVENUES> 11,108,312 24,824,010
<CGS> 10,245,746 23,172,800
<TOTAL-COSTS> 10,245,746 23,172,800
<OTHER-EXPENSES> 1,002,187 2,596,659
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 31,339 94,996
<INCOME-PRETAX> (108,282) (850,453)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (108,282) (850,453)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (108,282) (850,453)
<EPS-PRIMARY> (0.12) (0.48)
<EPS-DILUTED> 0 0
</TABLE>
