<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to _____
Commission File Number 1-11976
-------
UNAPIX ENTERTAINMENT, INC.
------------------------------------
(Exact name of small business issuer as
specified in charter)
Delaware 95-4404537
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification number)
200 Madison Avenue
New York, NY 10016
--------------------------------------
(Address of principal executive offices)
212-252-7600
-------------------------
(Issuer's Telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of November 10, 1997 there were 5,988,809 shares of the Company's common
stock outstanding.
No Exhibits
Page 1
<PAGE>
UNAPIX ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30,
1997
----------------
ASSETS
<S> <C>
Cash and equivalents $ 21
Accounts receivable- trade, net of allowances of $940 13,319
Film costs, net 22,307
Product inventory 1,360
Property and equipment, net 581
Other assets 4,097
Excess of cost over net assets acquired 2,934
--------
Total Assets $ 44,619
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities :
Accounts payable and accrued expenses $ 8,560
Deferred income taxes 679
Royalty payable 3,409
Bank line of credit 5,986
Acquisition fund payable 1,019
Variable rate senior subordinated notes 2,853
10% convertible subordinated notes 6,793
--------
Total Liabilities $ 29,299
--------
Stockholders' Equity :
Common stock $.01 par value per share; 20,000
authorized; 5,981 shares issued and outstanding 60
Cumulative convertible series A 8% preferred stock,
$.01 par value per share; 3,000 authorized; 505
issued and outstanding (aggregate liquidation
preference of $1,547) 5
Additional paid-in capital 16,989
Notes receivable from equity sales (2,042)
Retained earnings 308
--------
Total Stockholders' Equity $ 15,320
--------
Total Liabilities and Stockholders' Equity $ 44,619
========
</TABLE>
See accompanying notes to consolidated financial statements
Page 2
<PAGE>
UNAPIX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended September 30
1997 1996
---- ----
Revenues:
<S> <C> <C>
Licensing and distribution $ 2,687 $ 1,254
Home video 4,938 3,390
---------- ----------
7,625 4,644
---------- ----------
Operating costs:
Licensing and distribution 1,772 740
Home video 3,370 2,118
General and administrative expenses 1,754 1,682
---------- ----------
6,896 4,540
---------- ----------
Income from operations 729 104
Interest expense and financing expense, net (223) (73)
----------- -----------
Income before taxes 506 31
Provision for income taxes 205 12
---------- ----------
Net income $ 301 $ 19
========== ==========
Net income per common share $ .05 $ -
========== ==========
Average number of common shares outstanding 5,980 5,287
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 3
<PAGE>
UNAPIX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30
1997 1996
---- ----
Revenues:
<S> <C> <C>
Licensing and distribution $ 8,823 $ 4,752
Home video 12,774 10,477
---------- ----------
21,597 15,229
---------- ----------
Operating costs:
Licensing and distribution 6,071 3,062
Home video 8,400 6,781
General and administrative expenses 5,123 4,838
---------- ----------
19,594 14,681
---------- ----------
Income from operations 2,003 548
Interest expense and financing expense, net (644) (96)
----------- -----------
Income before taxes 1,359 452
Provision for income taxes 567 186
---------- ----------
Net income $ 792 $ 266
========== ==========
Net income per common share $ .12 $ .03
========== ==========
Average number of common shares outstanding 5,744 5,245
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 4
<PAGE>
UNAPIX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 792 $ 266
Adjustments to reconcile net income to net cash used by
operating activities:
Amortization and depreciation 10,390 6,036
Deferred income taxes 549 177
Accretion of debentures discount 66 31
Loss on disposal of assets - 2
(Increase) decrease in accounts receivable, net (3,165) 503
Increase in product inventory (671) (404)
Increase in other assets (1,988) (545)
Increase in accounts payable and
accrued expenses 3,696 1,011
Increase in royalties payable 641 1,469
------- -------
Total cash flows provided by operating activities 10,310 8,546
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Film cost expenditures (16,270) (12,552)
Purchase of property and equipment (204) (294)
Acquisition of subsidiary (1,589) -
------- -------
Total cash flows used by investing activities (18,063) (12,846)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from 10% convertible notes private placement 1,250 1,573
Net borrowings under bank line of credit 5,677 1,113
Proceeds from employee notes receivable 30 55
Proceeds from warrant and option exercises 189 -
Private placement expenditures (10) (52)
Preferred stock dividends (21) (23)
------- -------
Total cash flows from financing activities $ 7,115 $ 2,666
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
Page 5
<PAGE>
UNAPIX ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30
1997 1996
---- ----
<S> <C>
NET DECREASE IN CASH AND EQUIVALENTS $ (638) $(1,634)
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD 659 2,028
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 21 $ 394
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of accrued liability to acquisition fund payable 71 179
Preferred stock dividend paid in common stock 21 51
Stock issued for acquisition 1,400 -
Warrants issued 81 -
------- -------
$ 1,573 $ 230
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 453 $ 312
======= =======
Cash paid for taxes $ 42 $ 39
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
<PAGE>
UNAPIX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Unapix
Entertainment, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-QSB. 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 of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1996.
2. FINANCING
On May 2, 1997, Unapix Entertainment, Inc. (the "Company"), A Pix Entertainment
("A Pix") and Miramar Images, Inc., the Company's wholly-owned subsidiary
("Miramar;" collectively, the Company, A Pix and Miramar are referred to as
"Borrowers"), entered into a credit facility (the "Facility") with Imperial Bank
(the "Bank") providing for borrowings of up to $7,000,000. Loans are extended
and required to be repaid based upon the Company's outstanding accounts
receivable and other contractual rights to payment. Interest on the outstanding
loan balance accrues at a rate of 1.25% per annum in excess of the Bank's
publicly announced prime rate. The Borrowers were required to pay a facility fee
of $87,500, and are also required to pay an unused line fee at a rate equal to
.5% per annum of the amount by which $7,000,000 exceeds the average daily loan
balance during any calendar quarter.
The term of the Facility expires on September 30, 1998. Outstanding amounts
under the Facility are secured by a security interest in substantially all of
the Borrowers' assets. The Facility contains restrictive covenants that require
minimum tangible net worth. The covenants also, among other things, prohibit the
payment of cash dividends on the Company's common stock, and limit (a) the
Company's ratio of debt to net worth on a consolidated basis, (b) the amount of
costs that the Company can incur in producing, financing or acquiring
entertainment properties, (c) the amount of costs and expenses that the
Borrowers may incur with respect to theatrical releases of films, and (d) the
Borrowers incurring losses for two consecutive quarters.
The Facility replaces the Company's previous credit facility with Atlantic Bank
of New York that permitted borrowings of up to $2,500,000 (the "Atlantic
Facility"). Proceeds from the Facility were utilized to repay the Atlantic
Facility in full. Other proceeds from loans under the Facility have been, and
will be, used for working capital purposes, including enabling the Borrowers to
acquire distribution rights with respect to entertainment programming.
In April 1997, the Company completed a $1,000,000 private offering of Units,
each consisting of: (i) a $250,000 principal amount 10% Convertible Subordinated
Note due June 30, 2003
Page 7
<PAGE>
UNAPIX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
2. FINANCING (CONTINUED)
convertible into the Company's common stock, par value $.01 per share ("Common
Stock") at a price of $4.50 per share (a "Note"); and (ii) Warrants to purchase
25,000 shares of the Common Stock, at an exercise price of $6.00 per share
("Warrant"), expiring June 30, 2003. The Warrants and Notes are redeemable by
the Company under certain circumstances. The Units and the securities comprising
the Units were offered in a private placement. The shares of Common Stock
issuable upon exercise and conversion of the Notes and Warrants have since been
registered under the Securities Act of 1933 (the "Act"). A total of 100,000
Warrants were issued in conjunction with this offering. The Company incurred a
finder's fee of approximately $75,000 in total and 60,000 five year warrants
with an exercise price of $4.50.
In the quarter ended March 31, 1997, the Company sold in a private offering
$250,000 of the total $6,222,500 of Units sold, each consisting of: (i) a
$250,000 principal amount 10% Convertible Subordinated Note due June 30, 2003
convertible into the Company's common stock, par value $.01 per share ("Common
Stock") at a price of $4.50 per share (a "Note"); and (ii) Warrants to purchase
25,000 shares of the Common Stock, at an exercise price of $6.00 per share
("Warrant"), expiring June 30, 2003. The Warrants and Notes are redeemable by
the Company under certain circumstances. The Units and the securities comprising
the Units were offered in a private placement. The shares of Common Stock
issuable upon exercise and conversion of the Notes and Warrants have since been
registered under the Act. A total of 622,250 Warrants were issued in conjunction
with this offering. The Company incurred placement and finders' fees of $319,000
and 235,000 five year warrants with an exercise price of $4.50.
3. ACQUISITIONS
In March 1997 the Company acquired all of the capital stock of Miramar Images,
Inc. ("Miramar"), a producer and distributor of music videos and audio
recordings primarily for the New Adult Contemporary market, for an aggregate
purchase price of approximately 291,000 shares of the Company's common stock.
The Company's shares had an aggregate fair market value of approximately
$1,300,000 as of the closing date and were issued and delivered to certain
creditors and shareholders of Miramar in exchange for the capital stock and
Miramar debt. Additionally, Miramar's shareholders received approximately 22,500
shares of Common Stock of the Company having an aggregate fair market value of
approximately $100,000 as of the closing date. The acquisition of Miramar is
being accounted for as a purchase and the Company recorded $2,989,000 of excess
cost over net assets in connection with the acquisition.
Page 8
<PAGE>
UNAPIX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
3. ACQUISITIONS (CONTINUED)
In connection with the acquisition, the Company entered into a four-year
employment agreement with the current president of Miramar providing for, among
other things, an annual salary of $125,000 per year, a performance bonus equal
to 5% of Miramar's pre-tax profit (as defined), and one-half of one percent of
the increase of the gross revenues of Miramar over its revenues for the
immediately preceding year. In addition, for each fiscal year commencing on or
after January 1, 1998, if such increase in revenues is equal to or greater than
20% of such precedings year's gross revenues, then the president also will
receive one-half of one percent of the excess of such previous year's gross
revenues over the gross revenues realized by Miramar during the second
immediately preceding fiscal year. The Company also issued an aggregate of
210,000 stock options to Miramar employees and consultants (including the
current president). Each option entitles the holder to purchase one share of the
Company's Common Stock at a purchase price of $4.375 (i.e. $.125 above the
market price of the Company's Common Stock on the closing date of the
acquisition), subject to the holder's continuing to be employed by the Company.
The options have a term of ten years, but, subject to certain exceptions, will
not be exercisable for a period of 9.5 years unless Miramar's operations attain
certain earnings thresholds.
4. FILM COSTS
The Company's film costs include:
September 30,
1997
------------
(In thousands)
Films released $ 50,207
Accumulated amortization (37,544)
----------
12,663
Films completed but not released 2,075
Films in process 7,569
----------
$ 22,307
----------
----------
Page 9
<PAGE>
UNAPIX ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
5. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share ("EPS") is based upon the weighted
average number of common shares and common share equivalents outstanding during
each period.
For the quarters and nine months ended September 30, 1997 and 1996, the
weighted average shares consist of common shares outstanding. This amount does
not include the assumed conversion of any warrants, options or other convertible
securities as the impact of such conversions on the EPS calculation would be
antidilutive.
Earnings per share was determined by dividing net income, as adjusted
below, by applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income as reported $ 301 $ 19 $ 792 $ 266
Preferred stock dividends (30) (32) (91) (97)
---- ---- ---- ----
Total income used for earnings per share $ 271 $ (13) $ 701 $ 169
======= ====== ===== =====
Weighted average number of common and common
equivalent shares 5,980 5,287 5,744 5,245
===== ===== ===== =====
</TABLE>
Page 10
<PAGE>
UNAPIX ENTERTAINMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1996
Revenues for the three months ended September 30, 1997 increased by 64% to
$7,625,000 from $4,644,000 in the same three month period in 1996. This increase
in revenues is partially due as a result of the increase in licensing and
distribution revenues by 114% to $2,687,000 as compared to $1,254,000 in 1996.
This increase reflects the Company's aggressive growth in higher quality
non-fiction product acquisition and production. Management expects that the
improvement over the prior year will continue throughout 1997. Home video
revenues also increased by 46% to $4,938,000 from $3,390,000 in 1996. The
increase is primarily attributable to the Company's releasing stronger titles
into the video rental marketplace. The increase also reflects the contribution
of its acquisition of Miramar Images, Inc., which occurred late in the first
quarter. The Company expects to recognize substantial growth in the Home Video
market through the remainder of 1997. This growth should be generated by Miramar
Images, Inc. phasing into aggressive market penetration, as well as by the
Company's emphasis on distributing higher quality films to the rental
marketplace and non-fiction titles to the sell-through marketplace.
Licensing and distribution costs have increased by 139% to $1,772,000 from
$740,000 in 1996. This increase reflects increased royalty, amortization and
other film expenses associated with the higher levels of revenues described
above. Home video costs for the three months ended September 30, 1997 increased
by 59% to $3,370,000 from $2,118,000 as compared to the corresponding period in
1996. This increase reflects increased royalty, amortization and other film
expenses associated with the higher levels of revenues described above.
General and administrative costs were $1,754,000 for the three months ended
September 30, 1997, as compared to $1,682,000 in the same period in 1996. This
increase in costs reflects expense relating to Miramar.
The Company had income from operations of $729,000 for the three months ended
September 30, 1997, as compared to $104,000 in the same period in 1996. This
improvement in margins reflects the result of the Company's releasing higher
quality releases into the licensing and distribution and video rental and
sell-through markets.
Interest expense and financing expense increased to $223,000 in 1997 from
$73,000 in 1996. This increase primarily reflects the interest and related
expenses on the 10% Convertible Notes issued after the second quarter of 1996
and in 1997, as well as increased bank borrowings.
The Company had income before taxes of $506,000 for the three months ended
September 30, 1997 as compared to income before taxes of $31,000 for the
corresponding three month period in 1996. This improvement reflects the higher
quality releases into the Company's various markets. Management anticipates that
as the number of higher quality releases to the video rental and sell through
markets and the licensing and distribution markets increase in 1997, the impact
on operations should continue to be favorable.
Page 11
<PAGE>
UNAPIX ENTERTAINMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenues for the nine months ended September 30, 1997 increased by 42% to
$21,597,000 from $15,229,000 in the same nine month period in 1996. This
increase in revenues is primarily due to the increase in licensing and
distribution revenues by 86% to $8,823,000 as compared to $4,752,000 in 1996.
This increase reflects the Company's aggressive growth in higher quality
non-fiction product acquisition and production. Management expects that the
improvement over the prior year will continue throughout 1997. Home video
revenues increased by 22% to $12,774,000 from $10,477,000 in 1996. The increase
is partially attributable to the Company's releasing stronger titles into the
video rental marketplace. The increase also reflects the beginning of the
contribution of its acquisition of Miramar Images, Inc., which occurred late in
the first quarter. The Company expects to recognize substantial growth in the
Home Video market in the remainder of 1997. This growth should be generated by
Miramar Images, Inc. phasing into aggressive market penetration, as well as by
the Company's emphasis on distributing higher quality films to the rental
marketplace and non-fiction titles to the sell-through marketplace.
Licensing and distribution costs have increased by 98% to $6,071,000 from
$3,062,000 in 1996. This increase reflects increased royalty, amortization and
other film expenses associated with the higher levels of revenues described
above. Home video costs for the nine months ended September 30, 1997 increased
by 24% to $8,400,000 from $6,781,000 as compared to the corresponding period in
1996. This increase reflects increased royalty, amortization and other film
expenses associated with the higher levels of revenues described above.
General and administrative costs were $5,123,000 for the nine months ended
September 30, 1997, as compared to $4,838,000 in the same period in 1996. This
increase in costs reflects six months of expense relating to Miramar.
The Company had income from operations of $2,003,000 for the nine months ended
September 30, 1997, as compared to $548,000 in the same period in 1996. This
improvement in margins reflects the result of the Company's releasing higher
quality releases into the licensing and distribution and video rental and
sell-through markets.
Interest expense and financing expense increased to $644,000 in 1997 from
$96,000 in 1996. This increase primarily reflects the interest and related
expenses on the 10% Convertible Notes issued after the second quarter of 1996
and in 1997, as well as increased bank borrowings.
The Company had income before taxes of $1,359,000 for the nine months ended
September 30, 1997 as compared to income before taxes of $452,000 for the
corresponding nine month period in 1996. This improvement reflects the higher
quality releases into the Company's various markets. Management anticipates that
as the number of higher quality releases to the video rental and sell through
markets and the licensing and distribution markets increase in 1997, the impact
on operations should continue to be favorable.
Page 12
<PAGE>
UNAPIX ENTERTAINMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, operating activities provided cash
of $10,310,000. The Company used $18,063,000 in investing activities which
consisted primarily of $16,270,000 incurred in acquiring, producing and
promoting new properties for the home video rental and the licensing and
distribution markets. The additional cash requirements were primarily met by
cash on hand, the proceeds of the private offerings of 10% Convertible
Subordinated Notes, described below, and the utilization of the Company's credit
facility.
In the normal course of business the Company makes certain guarantees to
producers and other third parties as to the minimum amount such parties will
receive from the Company's distribution of their products. The Company has
committed to pay film acquisition advances and guarantees of approximately
$2,500,000 as of September 30, 1997, which amounts are payable upon delivery of
the films. The Company also expects to incur significant additional cash flow
needs relating to its continued expansion. In order to meet its future funding
needs the Company will utilize cash on-hand (including cash from the financings
described below), operating cash flows, its line of credit and other potential
financings.
On May 2, 1997, the Company entered into a credit facility (the "Facility") with
Imperial Bank (the "Bank") providing for borrowings of up to $7,000,000. The
Facility replaces the Company's previous credit facility with Atlantic Bank of
New York that permitted borrowings of up to $2,500,000 (the "Atlantic Facility")
(see footnote 2 for further details). Proceeds from the Facility were utilized
to repay the Atlantic Facility in full. Other proceeds from loans under the
Facility have been, and will be, used for working capital purposes, including
enabling the Borrowers to acquire distribution rights with respect to
entertainment programming.
As of September 30, 1997, under the Imperial Facility, the Company had borrowed
$5,677,000 and had remaining availability of $1,073,000.
In the first quarter, the Company sold in a private offering $250,000 of the
total $6,222,500 of Units sold, each consisting of: (i) a $250,000 principal
amount 10% Convertible Subordinated Note due June 30, 2003 convertible into the
Company's common stock, par value $.01 per share ("Common Stock") at a price of
$4.50 per share (a "Note"); and (ii) Warrants to purchase 25,000 shares of the
Common Stock, at an exercise price of $6.00 per share ("Warrant"), expiring June
30, 2003. The Warrants and Notes are redeemable by the Company under certain
circumstances. The Company incurred placement and finders' fees of $319,000 and
235,000 five year warrants with an exercise price of $4.50 (for further details
concerning this private placement see footnote 2).
In April 1997, the Company completed a $1,000,000 private offering of Units,
each consisting of: (i) a $250,000 principal amount 10% Convertible Subordinated
Note due June 30, 2003 convertible into the Company's common stock, par value
$.01 per share ("Common Stock") at a price of $4.50 per share (a "Note"); and
(ii) Warrants to purchase 25,000 shares of the Common Stock, at an exercise
price of $6.00 per share ("Warrant"), expiring June 30, 2003.
Page 13
<PAGE>
UNAPIX ENTERTAINMENT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Warrants and Notes are redeemable by the Company under certain
circumstances. The Company incurred finder's fees of approximately $75,000 and
60,000 five year warrants with an exercise price of $4.50.
During the third quarter of 1997 the Company commenced an offering to a select
group of accredited investors, of up to $5,000,000 principal amount of 10%
Convertible Subordinated Notes due June 30, 2004, convertible into Common Stock
at a price of $5.00 per share (a "Note"). For every $250,000 principal amount of
Notes purchased, the investor is also entitled to receive warrants to purchase
25,000 shares of Common Stock at an exercise price of $6.00 per share expiring
June 30, 2004 ("Warrants"). The Notes and Warrants, and the shares of Common
Stock issuable upon the conversion or exercise of the Notes and Warrants are
being offered in a private placement, pursuant to an exemption to the
registration requirements of the Securities Act of 1933, as amended. The
purchasers of the Notes will have certain registration rights with respect to
the shares of Common Stock issuable upon the conversion or exercise of the Notes
or Warrants. The Company has received subscriptions for $1,225,000 principal
amount of Notes.
The feature film and television licensing and distribution industries require
significant expenditures of funds to establish and expand a library of films and
programs from which revenues may be generated. The Company could be dependent
upon future financings to continue its long term plans of expansion and growth.
The Company anticipates that as its asset base grows it will secure an increased
working capital line of credit as well as explore other film acquisition
financing arrangements. The Company may also have debt or equity financings in
addition to that described above.
Except for the historical information contained herein, the matters discussed
are forward-looking statements that are subject to risks and uncertainties,
including those factors described in "FACTORS WHICH MAY AFFECT RESULTS"
contained in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 (which has been filed with the Securities and Exchange
Commission).
Page 14
<PAGE>
UNAPIX ENTERTAINMENT, INC.
PART II - OTHER INFORMATION
ITEMS 1 AND 3 ARE NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES
(A) In October 1997 the Company amended its Certificate of Incorporation
increasing the number of authorized shares of Common Stock from 20,000,000 to
40,000,000 shares.
(B) not applicable.
(C) A total of 948 shares of Common Stock are issuable to a public
relations firm as partial consideration for services rendered during the third
quarter of 1997. The shares were issued pursuant to the exemption contained in
Section 4(2) of the Securities Act of 1933, as amended (the "Act").
An aggregate of 200,000 shares of Common Stock that were issuable to
Robert Baruc, an executive officer and director of the Company, with respect to
the merger of A Pix Entertainment, Inc. with and into the Company were formally
issued in July 1997. The shares were issued pursuant to the exemption contained
in Section 4(2) of the Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 6, 1997, the Company held its 1997 Annual Meeting of
Stockholders at which stockholders elected Lawrence Bishop and Walter M. Craig,
Jr. as directors of the Company to serve until the Company's Annual Meeting of
Stockholders in the year 2000, or until their successors are duly elected.
4,455,120 shares were voted in favor of the election of such individuals and
votes were withheld with respect to 110,910 shares. In addition to the
individuals elected as directors at the 1997 Annual Meeting, Messrs. Herbert M.
Pearlman, David M. Fox, David S. Lawi, Robert Baruc, Scott Hanock and Martin D.
Payson continue to serve as directors of the Company.
The stockholders also approved an amendment to the Company's Certificate
of Incorporation increasing the number of authorized shares of Common Stock from
20,000,000 shares to 40,000,000 shares. The holders of record of 4,373,078
shares voted in favor of the amendment, including 3,985,752 shares of Common
Stock, 151,665 shares (including 143,331 shares of Common Stock) voted against
the amendment and 41,287 shares elected to abstain.
In addition, the stockholders also approved an amendment to the
Company's 1993 Stock Option Plan (the "Plan") at the Annual Meeting. The
amendment increases the number of shares authorized for issuance under the Plan
from 600,000 shares to 875,000 shares. Holders of 4,299,730 shares voted in
favor of the amendment, holders of 223,655 shares voted against the amendment
and holders of 42,645 shares voted to abstain with respect to the resolution.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NUMBER DESCRIPTION
3 Certificate of Amendment of
Certificate of Incorporation,
dated October 7, 1997,
increasing number of
authorized shares of common
stock
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
Page 15
<PAGE>
UNAPIX ENTERTAINMENT, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNAPIX ENTERTAINMENT, INC.
/s/ Daniel T. Murphy Chief Financial Officer November 14, 1997
- --------------------------
Daniel T. Murphy
Page 16
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
3 Certificate of Amendment of Certificate
of Incorporation, dated October 7, 1997,
increasing number of authorized shares of
common stock
27 Financial Data
Page 17
<PAGE>
EXHIBIT 3
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
UNAPIX ENTERTAINMENT, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Unapix Entertainment, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by amending Article Fourth to read in its entirety as follows:
"FOURTH: The aggregate number of shares which the Corporation shall
have the authority to issue is forty-three million (43,000,000), consisting of
forty million (40,000,000) shares of common stock and three million (3,000,000)
shares of preferred stock, and the par value of each share is $.01. The Board
of Directors may authorize the issuance from time to time of the preferred stock
in one or more series and with such designations, preferences, relative,
participating, optional and other special rights, and qualifications,
limitations or restrictions (which may differ with respect to each series) as
the Board may fix by resolution."
3. The amendment herein effected has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware. The amendment was adopted by the Corporation's stockholders by the
affirmative vote of the necessary number of shares, as required by law, at the
Corporation's Annual Meeting of Stockholders duly called and held on October 6,
1997, upon notice in accordance with Section 222 of the General Corporation Law.
IN WITNESS WHEREOF, we have hereunto signed our names and affirm that
the statements made herein are true under the penalties of perjury, this 7th day
of October,
1997.
/s/ David M. Fox
---------------------------------
David M. Fox, President
Attest:
/s/ Michael R. Epps
- ---------------------------------
Michael R. Epps
Assistant Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000902787
<NAME> UNAPIX ENTERTAINMENT, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 14,259
<ALLOWANCES> 940
<INVENTORY> 1,360
<CURRENT-ASSETS> 16,580
<PP&E> 830
<DEPRECIATION> 249
<TOTAL-ASSETS> 44,619
<CURRENT-LIABILITIES> 18,634
<BONDS> 10,665
0
5
<COMMON> 60
<OTHER-SE> 15,255
<TOTAL-LIABILITY-AND-EQUITY> 44,619
<SALES> 0
<TOTAL-REVENUES> 7,625
<CGS> 3,370
<TOTAL-COSTS> 5,142
<OTHER-EXPENSES> 1,754
<LOSS-PROVISION> 940
<INTEREST-EXPENSE> 223
<INCOME-PRETAX> 506
<INCOME-TAX> 205
<INCOME-CONTINUING> 301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
