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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 [ X ] NO [ ].
APPLICABLE ONLY 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 Sections 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 July 31, 1997, 8,454,690 shares of common stock, par value $.01 per
share, were issued and outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Financial Statements............................................................................................. 3
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997 (unaudited).............................. 3
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1996
and June 30, 1997 (unaudited)............................................................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1996 and June 30, 1997 (unaudited)............................................................ 5
Notes to Consolidated Financial Statements..................................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................................ 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................................................. 12
Item 6. Exhibits and Reports on Form 8-K................................................................................ 12
Signatures............................................................................................................... S-1
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FILM ROMAN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents............................................... $ 13,738,927 $ 15,120,583
Accounts receivable..................................................... 6,956,409 1,129,989
Film costs, net of accumulated amortization of $169,094,868 (December
31, 1996) and $187,025,724 (June 30, 1997).............................. 21,268,945 22,586,899
Property and equipment, net of accumulated depreciation and
amortization of $934,192 (December 31, 1996) and $1,047,332 (June 30,
1997)................................................................... 537,389 480,494
Deposits and other assets............................................... 315,625 389,399
------------ ------------
Total Assets............................................................ $ 42,817,295 $ 39,707,364
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................................ $ 3,790,136 $ 1,645,302
Accrued expenses........................................................ 1,830,314 1,420,962
Deferred revenue........................................................ 13,409,592 13,454,081
------------ ------------
Total liabilities....................................................... 19,030,042 16,520,345
Stockholders' equity
Preferred Stock, $0.01 par value, 5,000,000 shares authorized,
none issued...................................................... -- --
Common stock, $0.01 par value, 20,000,000 shares authorized
8,449,690 shares issued and outstanding at December 31, 1996 and
8,454,690 shares issued and outstanding at June 30, 1997................ 84,498 84,548
Additional paid-in capital.............................................. 36,305,684 36,305,684
Accumulated deficit..................................................... (12,602,929) (13,203,213)
------------ ------------
Total stockholders' equity................................... 23,787,253 23,187,019
------------ ------------
Total liabilities and stockholders' equity................... $ 42,817,295 $ 39,707,364
============ ============
</TABLE>
See accompanying notes.
3
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FILM ROMAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1996 1997 1996 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue.......................... $6,254,936 $7,145,840 $13,715,698 19,241,502
Cost of revenue.................. 5,816,345 6,273,489 12,927,052 17,930,856
Selling, general and............
administrative expenses........ 743,258 1,145,381 1,594,473 2,175,822
---------- ---------- ----------- -----------
Operating loss................... (304,667) (273,030) (805,827) (865,176)
Interest income.................. 50,655 113,174 96,423 264,892
Interest expense................. (16,912) ---- (32,766) ----
---------- ---------- ----------- -----------
Loss before provision for
income taxes................... (270,924) (159,856) (742,170) (600,284)
Provision for income taxes....... ---- ---- ---- ----
---------- ---------- ----------- -----------
Net loss......................... $ (270,924) $ (159,856) $ (742,170) $ (600,284)
========== ========== =========== ===========
Accretion of the difference
between the carrying value
and the liquidation value of
the Class A Redeemable
Preferred Stock................ (242,414) ---- (484,828) ----
Class A Redeemable
Preferred Stock Dividend....... (240,000) ---- (480,000) ----
---------- ---------- ----------- -----------
Net loss attributable to
common stock................... $ (753,338) $ (159,856) $(1,706,998) $ (600,284)
========== ========== =========== ===========
Net loss per share............... $ (0.16) $ (0.02) $ (0.35) $ (0.07)
========== ========== =========== ===========
Weighted average number of
shares outstanding............. 4,824,519 8,454,690 4,824,519 8,452,190
========== ========== =========== ===========
</TABLE>
See accompanying notes.
4
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FILM ROMAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1996 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................................................. $ (742,170) $ (600,284)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization......................................... 110,482 113,140
Amortization of film costs............................................ 12,927,052 17,930,856
Changes in operating assets and liabilities:
Accounts receivable................................................. (1,207,671) 5,826,420
Film costs.......................................................... (19,559,968) (19,248,810)
Refundable income taxes............................................. 332,500 800
Deposits and other assets........................................... (416,280) (74,574)
Accounts payable.................................................... 628,840 (2,144,834)
Accrued expenses.................................................... 1,374,358 (409,352)
Deferred revenue.................................................... 7,261,356 44,489
------------ ------------
Net cash provided by operating activities........................... 708,499 1,437,851
INVESTING ACTIVITIES:
Additions to property and equipment................................... (593,036) (56,245)
------------ ------------
Net cash used in investing activities................................. (593,036) (56,245)
FINANCING ACTIVITIES:
Proceeds from issuance of Class A Redeemable Preferred Stock and...... (1,628) ----
Warrants, net of issuance costs
Options exercised..................................................... ---- 50
Borrowings under debt................................................. 1,780,000 ----
Repayments on debt.................................................... (2,276,249) ----
------------ ------------
Net cash (used in) provided by financing activities................... (497,877) 50
Net (decrease) increase in cash....................................... (382,414) 1,381,656
------------ ------------
Cash and cash equivalents at beginning of period...................... 5,176,090 13,738,927
Cash and cash equivalents at end of period............................ $ 4,793,676 $ 15,120,583
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.......................................................... $ 64,107 $ ----
------------ ------------
Income taxes...................................................... $ ---- $ ----
------------ ------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
For the six months ended June 30, 1996 the Company accrued dividends of
$480,000 on the outstanding shares of its Class A Redeemable Preferred Stock and
$300,000 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 $484,828 on the outstanding shares
of its Class A Redeemable Preferred Stock.
See accompanying notes.
5
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FILM ROMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) - BASIS OF PRESENTATION
Film Roman, Inc., a Delaware corporation (the "Company"), currently
conducts all of its operations through its wholly owned subsidiary Film Roman,
Inc., a California corporation ("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 June 30, 1997 and the results of its operations for the three and
six months ended June 30, 1996 and 1997, and the cash flows for the six months
ended June 30, 1996 and 1997 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 Annual Report on Form
10-K for the year ended December 31, 1996 filed with the Securities and Exchange
Commission.
(2) - NET LOSS PER COMMON SHARE
For the three months and the six months ended June 30, 1996, per share
data is based on the weighted average number of common and common equivalent
shares outstanding during the period, and is 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 months and the
six months ended June 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 $242,414, and $484,828
respectively, and to the accrual of dividends of $240,000 and $480,000
respectively, on the Class A Redeemable Preferred Stock.
For the three months and the six months ended June 30, 1997, the per
share data is based on the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares,
consisting of outstanding stock options, are not included since they are
antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, Earnings Per Share ("SFAS
No. 128"), which is effective for annual and interim financial statements issued
for periods ending after December 15, 1997 and early adoption is not permitted.
When adopted, the Statement will require restatement of prior years' earning
per share ("EPS"). SFAS No. 128 was issued to simplify the standards for
calculating EPS previously in APB No. 15, Earnings Per Share. SFAS No. 128
replaces the presentation of primary EPS with a presentation of basic EPS. The
new rules also require dual presentation of basic and diluted EPS on the face of
the statement of operations for companies with a complex capital structure. For
the Company, basic EPS will exclude the dilutive effects of stock options and
warrants. Diluted EPS for the Company will reflect all potential dilutive
securities. Under the provisions of SFAS No. 128, basic and diluted EPS would
have been the same for the three months and six months ended June 30, 1996 and
1997 as the reported amounts for such periods.
6
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(3) - FILM COSTS
The components of unamortized film costs consist of the following:
<TABLE>
<CAPTION>
AS OF AS OF JUNE 30, 1997
DECEMBER 30, 1996 (UNAUDITED)
----------------- --------------------
<S> <C> <C>
Animated film productions released, less amortization... $ 7,946,483 $ 8,179,967
Animated film productions in process.................... 13,069,981 14,081,481
Animated film productions in development................ 252,481 325,451
----------- -----------
$21,268,945 $22,586,899
=========== ===========
</TABLE>
(4) - BLUES BROTHERS: THE ANIMATED SERIES
Following discussions between the Company and United Paramount Network
regarding certain creative aspects of the Company's proprietary production of
Blues Brothers: The Animated Series for the 1997-98 season, the Company put
production into hiatus in March 1997. The Company is continuing to re-evaluate
various elements of the project, is seeking a possible new financial partner for
the production, and may or may not be successful in ultimately recovering its
investment, which amounted to approximately $5.5 million at June 30, 1997. In
the event the Company determines that all or a portion of its investment is not
recoverable, it will write off the appropriate amount.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
relate to, among other things, the Company's future production and delivery
schedule (including the number of episodes of programming to be produced and
delivered in 1997 and 1998); production fees, services and costs; and liquidity.
These forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties, including
without limitation, those described under the caption "Risks Related to the
Business" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996. Actual results could differ materially from these forward-
looking statements.
GENERAL
The Company creates, develops, produces and distributes high quality,
family-oriented animated television programming. Historically, the Company has
produced substantially all of its programming for third parties on a "fee-for-
services" basis. Fees paid to the Company for these production services
generally range from $300,000 to $600,000 per episode and typically cover all
direct production costs plus a profit margin. The Company has begun to produce
programming for which it controls some of the "proprietary rights" associated
with such programming (including, for example, international distribution and
licensing and merchandising rights). Fees paid to the Company for these
production services typically do not cover all direct production costs.
Generally, the Company seeks to cover at least 50% of its production costs prior
to production of its proprietary programs and seeks to cover the remaining
production costs through the exploitation of the proprietary rights associated
with these programs. As a result, the Company may recognize revenue associated
with its proprietary programming over a period of years.
The Company produces a limited number of television series in any year and
is substantially dependent on revenues from licensing these programs to
broadcasters. The Company's future performance will be affected by issues
facing all producers of animated programming, including risks related to the
limited number of time slots allocated to children's and/or animated television
programming, the intense competition for those time slots, the limited access to
distribution channels (particularly for programs produced by independent
studios), the declining license fees paid to producers of programming by
broadcasters and the regulations implemented by the Federal Communications
Commission governing program content. While the Company seeks to limit its
financial risk associated with its proprietary programming by obtaining
commitments prior to production to cover at least 50% of its direct production
costs, there can be no assurance that the Company will be able to cover the
balance of its production costs and overhead costs relating to production,
licensing and distribution through the exploitation of its proprietary rights.
As a result of the foregoing risks, there can be no assurance that the Company
will be able to generate revenues that exceed its costs.
1997 AND 1998 PRODUCTION AND DELIVERIES
The Company has completed production of substantially all of the 159
episodes of programming that it committed to produce and deliver for the 1996-97
broadcast season. The Company has begun production of 56 episodes of fee-for-
services programming which are currently scheduled to air during the 1997-98
season. As of June 30, 1997, the Company had no commitments to produce or
deliver any new episodes of proprietary programming for the 1997-98 season.
The Company presently expects to deliver approximately 66 episodes of
programming in 1997. Of these 66 episodes, 31 are fee-for-services programs for
airing during the 1996-97 season, 10 are proprietary
8
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programs, also airing during the 1996-97 season, and the remaining 25 are fee-
for-services programs which are currently scheduled to air during the 1997-98
season. Some of the 25 episodes for the 1997-98 season which are currently
expected to be delivered in 1997 may be delivered in 1998. Similarly, some of
the episodes for the 1997-98 season which the Company presently expects to
deliver in 1998 may be delivered in 1997. The estimated delivery of 66 episodes
in 1997 represents a decrease of 75 episodes (or 53%) from the number of
episodes delivered in 1996.
BLUES BROTHERS: THE ANIMATED SERIES
Following discussions between the Company and United Paramount Network
regarding certain creative aspects of the Company's proprietary production of
Blues Brothers: The Animated Series for the 1997-98 season, the Company put
production into hiatus in March 1997. Accordingly, none of the episodes of
Blues Brothers: The Animated Series are included in any of the production or
delivery estimates described above under "-1997 and 1998 Production and
Deliveries." The Company is continuing to re-evaluate various elements of the
project, is seeking a possible new financial partner for the production, and may
or may not be successful in ultimately recovering its investment, which amounted
to approximately $5.5 million at June 30, 1997. In the event the Company
determines that all or a portion of its investment is not recoverable, it will
write off the appropriate amount.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Total revenue increased by 14%, or $0.8 million, to $7.1 million for the
three months ended June 30, 1997, from $6.3 million for the comparable period in
the prior year. Total revenue increased primarily as a result of the delivery
of 10 episodes of programming during the 1997 period compared to the five
episodes delivered during the 1996 period.
The Company delivered 10 "fee-for-services" episodes during the three
months ended June 30, 1997, compared with five episodes in the comparable period
in 1996. Fee-for-services revenue increased 107%, or $2.9 million, to $5.6
million from $2.7 million during the respective periods.
The Company delivered no "proprietary" episodes during either of the three-
month periods ended June 30, 1997 or 1996. "Proprietary revenue" consists of
revenue derived from the U.S. license fees paid upon the initial delivery of a
new episode of proprietary programming to a U.S. broadcaster and from the
exploitation of the proprietary rights (e.g., merchandising, licensing and/or
international distribution rights) associated with the proprietary episodes in
the Company's library that were initially delivered in prior periods.
Proprietary revenue from the exploitation of the proprietary rights associated
with the programs in the Company's library decreased by $0.2 million to $0.7
million for the three months ended June 30, 1997 from $0.9 million for the three
months ended June 30, 1996.
Other revenue decreased by approximately $1.9 million during the three
months ended June 30, 1997 as compared to the same period of the prior year, due
primarily to a $1.2 million decrease in revenue generated by the Company's
participation in net profits from certain of its fee-for-services series as well
as a $0.6 million decrease in revenue from commercials and specials.
Total cost of revenue increased by 8%, or $0.5 million, to $6.3 million for
the three months ended June 30, 1997, from $5.8 million for the three months
ended June 30, 1996. Total cost of revenue, as a percentage of sales, decreased
by 5% to 88% for the three months ended June 30, 1997, as compared to 93% for
the three months ended June 30, 1996, primarily due to improved margins on fee-
for-services episodes
9
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and the fact that fee-for-services revenue and costs represented a significantly
larger component of both total revenue and costs during the 1997 period.
Total selling, general and administrative expenses for the three months
ended June 30, 1997 increased by $0.4 million to $1.1 million for the three
months ended June 30, 1997 from $0.7 million for the comparable period in 1996,
due primarily to increased professional fees and ongoing costs of operating a
public company.
Operating loss remained constant at $0.3 million for the three months ended
June 30, 1997, as compared to the comparable period in 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
Total revenue increased by 40%, or $5.5 million, to $19.2 million for the
six months ended June 30, 1997, from $13.7 million for the comparable period in
the prior year. Total revenue increased primarily as a result of the delivery
of 37 episodes of programming during the 1997 period compared to the 17 episodes
delivered during the 1996 period.
The Company delivered 27 "fee-for-services" episodes during the six months
ended June 30, 1997, compared to 14 episodes in the comparable period in 1996.
Fee-for-services revenue increased 93%, or $7.0 million, to $14.5 million for
the six months ended June 30, 1997, from $7.5 million during the comparable
period in 1996.
The Company delivered 10 "proprietary" episodes during the six months ended
June 30, 1997 compared to three episodes delivered during the comparable period
for 1996. The increase in the number of proprietary episodes delivered resulted
in a revenue increase of approximately $0.9 million. The episodes delivered in
the 1997 period were syndicated programs that generated a lower license fee per
episode than the episodes delivered to a major network in the 1996 period. This
revenue increase was offset by a $1.2 million decrease in revenue from the
exploitation of the proprietary rights associated with the programs in the
Company's library, resulting in a net decrease of $0.3 million in total
proprietary revenue.
Other revenue decreased by approximately $1.2 million during the six months
ended June 30, 1997, as compared to the same period of the prior year, due
primarily to a combined decrease of approximately $2.3 million in revenue
generated by the Company's participation in net profits from certain of its fee-
for-services series and revenue from commercials and specials. This decrease
was offset by an increase in revenue of approximately $1.2 million from the
creative services division and the Company's interactive unit, which ceased
production beginning in the first quarter of 1997.
Total cost of revenue increased by 39%, or $5.0 million, to $17.9 million
for the six months ended June 30, 1997, from $12.9 million for the six months
ended June 30, 1996. Total cost of revenue, as a percentage of sales, remained
fairly consistent for the two periods.
Total selling, general and administrative expenses for the six months ended
June 30, 1997 increased by $0.6 million to $2.2 million from $1.6 million for
the comparable period in 1996, due primarily to increased professional fees and
ongoing costs of operating a public company.
Operating loss was $0.9 million for the six months ended June 30, 1997, as
compared to a loss of $0.8 million for the six months ended June 30, 1996.
10
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LIQUIDITY AND CAPITAL RESOURCES
Greater capital resources are required for the Company to develop and
produce proprietary programs, retain the proprietary rights associated with such
programs, and increase it presence in the licensing and merchandising and
international distribution markets. The Company seeks to limit the financial
risk associated with its proprietary programming by obtaining commitments prior
to production to cover at least 50% of its direct production costs, but the
Company must utilize its own funds to cover remaining production costs and
overhead costs relating to production, licensing and distribution. The Company
seeks to cover the remaining production costs through the exploitation of the
proprietary rights associated with the programs in its library (e.g.,
merchandising, licensing and/or international distribution rights).
Historically, in the fourth quarter, and to a lesser extent the third quarter,
cash used in operations typically exceeded cash generated by operations as
completed shows were delivered to broadcasters. However, the Company has begun
to exploit, to a greater extent, the international distribution rights
associated with the proprietary programs in its library. As a result, the
Company expects that cash used in or provided by operations will fluctuate
greatly from quarter to quarter, due in part, to the international sales and
collections cycle related to the programs in its library.
For the six months ended June 30, 1997, net cash provided by operating
activities was approximately $1.4 million due to new international sales of the
Company's proprietary shows as well as a decrease in accounts receivable, offset
by cash used in connection with film production activities and fluctuations in
other operating assets and liabilities.
The Company is seeking to obtain a new bank facility in the principal
amount of approximately $3.0 to $5.0 million. There can be no assurance that it
will be able to obtain a new bank facility on terms that are satisfactory to the
Company. Management believes that the Company's cash and cash equivalents and
anticipated cash flow from operations will be sufficient to fund the Company's
operating requirements for at least the next year, whether or not the Company
enters into a new bank facility.
11
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 Annual Meeting of Stockholders of the Company was held on June
19, 1997. The following matters were submitted to stockholders for a vote:
1. Election of Robert Cresci as a Class I director to serve until the
2000 annual meeting of stockholders and until his successor is
elected and has qualified.
Shares Voted
For Withheld Authority
--- ------------------
8,105,410 14,280
2. Ratification of the appointment of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending
December 31, 1997.
Shares Voted
For Against Abstentions
--- ------- -----------
8,112,850 5,940 900
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------------------------------------------
<C> <S>
+2.1 Plan of Reorganization Agreement dated as of May 15, 1996 by and among the Registrant, Film Roman,
Inc., a California corporation ("Film Roman California"), and certain stockholders party thereto
+2.2 First Amendment to Plan of Reorganization Agreement dated as of September 9, 1996
+3.1 Certificate of Incorporation of Registrant
+3.2 Bylaws of Registrant
+4.1 Specimen Stock Certificate
+*10.1 Employment Agreement dated as of August 7, 1995 by and between Film Roman California and Mr. Phil
Roman
+*10.2 Employment Agreement dated as of August 7, 1995 by and between Film Roman California and Mr.
William Schultz
+*10.3 Employment Agreement dated as of February 14, 1995 by and between Film Roman California
and Mr. Jon Vein
+*10.4 Employment Agreement dated as of December 15, 1995 by and between Film Roman California and Ms.
Jacqueline Blum
+*10.5 Employment Agreement dated as of January 2, 1996 by and between Film Roman California
and Mr. Gregory Arsenault
+*10.7 Stock Option Plan of Registrant
</TABLE>
12
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<TABLE>
<C> <S>
+*10.8 Form of Non-Qualified Stock Option Agreement for Employees
+*10.9 Form of Incentive Stock Option Agreement for Employees
+*10.10 Form of Stock Option Agreement for Mr. Schultz
+10.11 Lease for Registrant's headquarters and studio in North Hollywood, California
+10.12 Promissory Note for $1,230,000 between Film Roman, Inc and First Charter Bank, N.A.
+10.13 Rights Agreement dated May 30, 1995 between Daniel Aykroyd, Judith Belushi Pisano and
Film Roman, Inc.
+10.14 Agreement dated December 11, 1990, between Film Roman, Inc. and Alevy Productions, Inc.
+10.15 Series Production Agreement dated as of April 27, 1990 between Fox Children's Network and
Film Roman, Inc.
+10.16 Agreement dated as of June 20, 1995, between Film Roman, Inc. and Starstream Limited
+10.17 Amendment dated December 18, 1992 between Film Roman, Inc. and Fox Children's Network
+10.18 Amendment dated March 22, 1994 between Film Roman, Inc. and Fox Children's Network
+10.19 Agreement dated October 5, 1994 between Flying Heart, Inc. and Film Roman, Inc.
+10.20 Agreement dated February 20, 1996 with Live Film and Mediaworks, Inc. and Film Roman, Inc.
+10.21 Letter Agreement dated January 9, 1995 with Agreement dated November 22, 1993, revised December
9, 1994, December 13, 1993, June 23, 1994 and August 1, 1994 between Fox Children's Network
("FCN") and Film Roman, Inc.
+10.22 Agreement dated June 1, 1995, between Fox Children's Network and Film Roman, Inc.
+10.23 Amendment dated March 1, 1996 to the Agreement dated as of November 22, 1993 between Fox Children
Network and Film Roman, Inc.
+10.24 Agreement dated September 12, 1994 between Film Roman, Inc. and Tone Loc, Inc.
+10.25 Agreement dated as of May 7, 1993 between Film Roman, Inc. and Adelaide Productions, Inc.
+10.26 Amendment dated as of May 18, 1994 revised as of June 14, 1994 between Film Roman, Inc. and Adelaide
Productions, Inc.
+10.27 Amendment dated as of June 20, 1994 revised as of July 7, 1994 between Film Roman, Inc. and Adelaide
Productions, Inc.
+10.28 Agreement dated November 9, 1993 between Film Roman, Inc. and Felix The Cat Creations, Inc.
+10.29 Agreement dated as of June 28, 1994 between CBS Entertainment and Film Roman, Inc.
+10.30 Agreement dated September 27, 1994 between Felix The Cat Creations, Inc. and Film Roman, Inc.
+10.31 Letter Agreement dated June 6, 1995 between Felix The Cat Corporation and Film Roman, Inc.
+10.32 Agreement dated September 1, 1995 between Felix Comics, Inc. and Film Roman, Inc.
+10.33 Agreement dated November 20, 1995 between Felix The Cat Creations, Inc. and Film Roman
+10.34 Amendment to Output Distribution Agreement dated February 1, 1994 between Film Roman,
Inc. and Taurus Film GmbH & Company
+10.35 Output Distribution Agreement dated as of September 1, 1994 between Film Roman, Inc. and
Taurus Film GmbH & Company
+10.36 Agreement dated April 1, 1991 between United Media/Mendelson Production and Film Roman, Inc. re:
Prime Time Television special
+10.37 Agreement dated April 1, 1991 between United Media/Mendelson Production and Film Roman, Inc. re:
Saturday Morning Series
+10.38 Co-Production Agreement dated June 11, 1993 between Canal Plus and Bluebird Toys (the
U.K.) Limited and Film Roman, Inc. regarding Mighty Max
+10.39 Agreement dated April 12, 1994 between Canal Plus and Bohbot Entertainment Worldwide, Inc. and Film
Roman, Inc
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
+10.40 Form of Agreement between Film Roman, Inc. and Threshold Entertainment
+10.41 Agreement dated as of March 30, 1995 as revised May 10, 1995 between Film Roman, Inc. and
Greengrass Productions, Inc.
+10.42 Agreement dated as of April 15, 1996 between Film Roman, Inc. and The Harvey Entertainment Company
+10.43 Agreement dated as of January 29, 1992 between Film Roman, Inc. and 20th Television
+10.44 Agreement dated as of March 7, 1996, between Film Roman, Inc. and LUK International
+10.45 Agreement dated as of May 22, 1996, between Film Roman, Inc. and Canal-Plus--Spain
+10.46 Co-Production Agreement between Television Espanola, S.A. and Film Roman, Inc.
+10.47 Commitment Letter dated September 9, 1996 from certain stockholders of Film Roman California
11 Earnings Per Share
+21.1 Subsidiaries of the Registrant
27 Financial Data Schedule
- -------------------------------
+ Incorporated by reference to the similarly numbered exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-03987) as filed
with the Securities and Exchange Commission on September 30, 1996.
* Management contract or other compensation plan or arrangement.
</TABLE>
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1997.
14
<PAGE>
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: August 14, 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 SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1997 1996 1997
------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Weighted average shares outstanding......... 2,141,250 8,454,690 2,141,250 8,452,190
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 ----
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 ----
---------- ---------- ----------- ----------
4,824,519 8,454,690 4,824,519 8,452,190
========== ========== =========== ==========
Net loss attributable to common stock........ $ (753,338) $ (159,856) $(1,706,998) $ (600,284)
========== ========== =========== ==========
Net loss per share........................... $ (0.16) $ (0.02) $ (0.35) $ (0.07)
========== ========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 SIX MONTH PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 15,120,583 15,120,583
<SECURITIES> 0 0
<RECEIVABLES> 1,129,989 1,129,989
<ALLOWANCES> 0 0
<INVENTORY> 22,586,899 22,586,899
<CURRENT-ASSETS> 0 0
<PP&E> 1,527,826 1,527,826
<DEPRECIATION> 1,047,332 1,047,332
<TOTAL-ASSETS> 39,707,364 39,707,364
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 84,548 84,548
<OTHER-SE> 23,102,471 23,102,471
<TOTAL-LIABILITY-AND-EQUITY> 39,707,364 39,707,364
<SALES> 7,145,840 19,241,502
<TOTAL-REVENUES> 7,145,840 19,241,502
<CGS> 6,273,489 17,930,856
<TOTAL-COSTS> 6,273,489 17,930,856
<OTHER-EXPENSES> 1,145,381 2,175,822
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 113,174 264,892
<INCOME-PRETAX> (159,856) (600,284)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (159,856) (600,284)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (159,856) (600,284)
<EPS-PRIMARY> (0.02) (0.07)
<EPS-DILUTED> 0 0
</TABLE>
