SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 August 14, 2000 there were 11,322,913 shares of the Company's common
stock outstanding.
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<S> <C> <C>
June 30,
Assets 2000 December 31,
(UNAUDITED) 1999
------ -------
Cash and cash equivalents $ - $ 301
Accounts receivable, net of allowances 17,517 17,921
Film costs, net 52,067 47,074
Product inventory 1,364 3,917
Property and equipment, net 937 997
Other assets 1,134 1,617
Deferred loan cost 1,737 1,895
Excess of cost over fair value of net
assets acquired, net of amortization 2,567 3,084
-------- --------
Total Assets $ 77,323 $ 76,806
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 8,636 $ 6,218
Deferred income taxes - 1,259
Royalty payable 649 2,384
Revolving credit 33,865 30,641
Variable rate senior subordinated notes 720 701
10% convertible subordinated notes 4,611 4,586
-------- --------
Total Liabilities $ 48,481 45,789
-------- --------
Stockholders' Equity:
Preferred stock; $.01 par value; 3,000,000 authorized
Cumulative convertible Series A 8% preferred stock;
488,000 issued and outstanding (aggregate
liquidation preference of $1,464) 5 5
Non-voting convertible Series B 6% preferred stock;
300 shares issued and outstanding, (aggregate
liquidation reference of $3,000) - -
Cumulative Convertible Series C 8% preferred stock;
1,175 shares issued and outstanding (aggregate
liquidation preference of $1,175) - -
Common stock $.01 par value per share;
40,000,000 authorized; 10,257,000 and
10,426,000 shares issued and outstanding 104 103
Additional paid-in capital 35,234 34,923
Notes receivable from equity sales (2,706) (2,683)
Retained earnings (accumulated deficit) (3,795) (1,331)
-------- --------
Total Stockholders' Equity 28,842 31,017
-------- --------
Total Liabilities and Stockholders' Equity $ 77,323 $ 76,806
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Three Months Ended June 30
2000 1999
---- ----
Revenues:
Licensing and distribution $ 1,150 $ 5,494
Home video 6,015 4,582
------ ------
7,165 10,076
------ ------
Operating costs:
Licensing and distribution 868 2,460
Home video 4,732 2,778
General and administrative expenses 2,436 3,334
------ ------
8,036 8,572
------ ------
Income (loss) from operations (871) 1,504
Interest and debt expense, net 449 758
------ ------
Income (loss) from continuing
operations before taxes (1,320) 746
Provision (benefit) for income taxes (528) 307
------ ------
Income (loss) from continuing operations (792) 439
Loss from discontinued operations, net of
tax benefit of $633 and $105 (1,626) (151)
------ ------
Net income (loss) $(2,418) $ 288
====== ======
Income (loss) per common share basic and diluted:
Continuing operations $ (.09) $ .05
Discontinued operations (.16) (.02)
------ ------
Net income (loss) $ (.25) $ .03
====== ======
Average number of basic common shares outstanding 10,257 7,590
====== ======
Average number of diluted common shares outstanding 10,257 7,701
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Six Months Ended June 30
2000 1999
---- ----
Revenues:
Licensing and distribution $ 5,249 $ 8,849
Home video 10,629 10,670
------ ------
15,878 19,519
------ ------
Operating costs:
Licensing and distribution 3,437 4,082
Home video 6,916 6,662
General and administrative expenses 5,202 5,842
------ ------
15,555 16,586
------ ------
Income from operations 323 2,933
Interest and debt expense, net 1,088 1,310
------ ------
Income (loss) from continuing operations before taxes (765) 1,623
Provision (benefit) for income taxes (295) 676
------ ------
Income (loss) from continuing operations (470) 947
Loss from discontinued operations, net
of taxe benefit of $739 and $192 (1,799) (277)
------ ------
Net income (loss) $(2,269) $ 670
====== ======
Income (loss) per share basic and diluted:
Continuing operations $ (.06) $ .10
Discontinued operations (.18) (.04)
------ ------
Net income (loss) (.24) $ .06
====== ======
Average number of basic common shares outstanding 10,250 7,562
====== ======
Average number of diluted common shares outstanding 10,250 7,638
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Six Months Ended June 30
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,269) $ 670
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 5,572 5,652
Deferred income taxes (benefit) (1,034) 406
Accretion of debentures discount 44 86
Goodwill amortization and charge 517 -
Decrease (increase) in accounts receivable, net 404 (585)
(Increase) decrease in product inventory 2,553 (185)
(Increase) decrease in other assets 483 (333)
Increase in accounts payable and accrued expenses 2,193 (63)
Increase (decrease) in royalties payable (1,735) (2,002)
------ ------
Total cash flows provided by operating activities 6,728 3,646
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Film cost expenditures (10,251) (9,288)
Purchase of property and equipment (96) (199)
------ ------
Total cash flows used by investing activities (10,347) (9,487)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under bank line of credit 3,224 4,709
Proceeds from sale of stock 145
Proceeds from warrant and option exercises - 83
Preferred stock dividends (29) (21)
Advances from affiliates - 675
Other (22) -
Proceeds from issuance of preferred - Series C - 500
------ ------
Total cash flows from financing activities $ 3,318 $ 5,946
------ ------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
(UNAUDITED)
<TABLE>
<S> <C> <C>
For the Six Months Ended June 30
2000 1999
---- ----
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS $ (301) $ 105
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 301 1,707
------ ------
CASH AND EQUIVALENTS AT END OF PERIOD $ - $ 1,812
====== ======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Preferred dividend paid in common stock $ 167 $ 159
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,728 $ 1,316
====== ======
Cash paid for taxes $ 55 $ 61
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(UNAUDITED)
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-Q. 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 six-month
period ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's Form 10-K for the year ended December 31, 1999.
The Company's unaudited consolidated financial statements for June 30, 2000
have been prepared in accordance with generally accepted accounting principles
applicable to a going concern. The Company is currently in default under its
revolving credit agreement primarily as a result of an overadvance in the
amount of $1,176,000, as of August 17, 2000, based on the current eligible
accounts receivable. The Company is discussing a forebearance agreement with
GECC and currently anticipates that such an agreement will be entered into.
The terms and conditions to be included in the agreement have yet to be agreed
upon. There can be no assurance that an agreement will be concluded.
The Company has instituted a cost savings program which together with
operations that have been discontinued is expected to attain annual cost
savings in excess of $3 million. The Company is also pursuing other financing
possibilities but there can be no assurance that it will be successful. The
financial statements do not include any adjustments that might result from this
uncertainty.
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. Assuming that the Company is
able to satisfy its immediate capital needs, in all likelihood the Company will
continue to require significant capital infusions in the future. As its asset
base grows, the Company may be able to secure an increased working capital line
of credit as well as explore other film acquisition financing arrangements. The
Company may also have additional debt or equity financings.
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
2. Film costs
The Company's film costs include: June 30, December 31,
2000 1999
-------- -----------
(In thousands)
Films released $ 119,746 $108,909
Accumulated amortization (73,808) (68,550)
------- -------
45,938 40,359
Films in process 6,129 6,715
------- -------
$ 52,067 $ 47,074
======= =======
</TABLE>
3. Net income (loss) per common share
Net income (loss) per basic common share ("EPS") is computed by dividing the
net income available to common shareholders by the weighted average number of
common shares outstanding.
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(UNAUDITED)
Net income (loss) per diluted share is computed by dividing the net income
available to common shareholders, adjusted on an as if converted basis, by the
weighted average number of common shares outstanding plus potential dilutive
securities.
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
Weighted average basic shares outstanding 10,257 7,590 10,250 7,562
Effect of dilutive securities:
Options - 111 - 76
Warrants - - - -
------ ------ ------ ------
Weighted average dilutive
shares outstanding 10,257 7,701 10,250 7,638
====== ====== ====== ======
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
Income (loss) from continuing operations $ (792) $ 439 $ (470) $ 947
Preferred stock dividends 97 94 194 183
------ ------ ------ ------
(889) $ 345 (664) $ 764
Discontinued operations (1,626) (151) (1,799) (277)
------ ------ ------ ------
Net income (loss) for earnings per share $(2,515) $ 194 $(2,463) $ 487
====== ====== ====== ======
</TABLE>
4. Conversion of Convertible Series B Preferred Stock
On July 14, 2000, all the outstanding Convertible Series B Preferred Stock, by
its terms, was converted into 955,414 shares of the Company's common stock.
<PAGE>
5. Discontinued Operations
In June 2000 the Company decided to cease its catalog operations and sell its
90% owned subsidiary The Jazz Store, Inc.
The loss from operations of these units is as follows:
<TABLE>
<S> <C> <C> <C> <C>
CATALOG OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------ ------ ------ ------
Revenue $ 112 $ 210 $ 274 $ 465
Costs and Expenses 523 399 867 809
------ ------ ------ ------
Loss from Operations $ (411) $ (189) $ (593) $ (344)
====== ====== ====== ======
THE JAZZ STORE, INC.
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------ ------ ------ ------
Revenue $ 222 $ 314 $ 483 $ 450
Costs and Expenses 453 381 811 575
------ ------ ------ ------
Loss from Operations $ (231) $ (67) $ (328) $ (125)
====== ====== ====== ======
</TABLE>
The loss on disposal for the Catalog Operations is $707,000 and consists
primarily of abandoned assets. The Jazz Store, Inc. is expected to be sold to
its former owners, who are the current management of the operation. The loss on
disposal of $910,000 includes expected losses through the date of disposition
of $125,000. The sale of The Jazz Store, Inc. is subject to approval by the
Company's principal lender and the Company's board of directors.
<PAGE>
UNAPIX ENTERTAINMENT, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months Ended June 30, 2000 Compared with Three Months Ended June 30, 1999
Revenues for the three months ended June 30, 2000 decreased by 29% to
$7,165,000 from $10,076,000 in the same three month period in 1999. Licensing
revenue decreased 79% to $1,150,000 in 2000 from $5,494,000 in 1999 and is due
primarily to lower foreign market sales because of restructuring of sales
management in Europe. Home video revenue increased 31% to $6,015,000 from
$4,582,000 due to a bulk sale of inventory to a duplicator which offset a
decline in sell through sales due to a consolidation of the sales force which
was not fully implemented until June 2000.
Licensing costs decreased by $1,592,000 in the 2000 period due to reduced
amortization and royalty related to the lower sales levels. Home video costs
in 2000 period increased by 70% primarily as a result of the bulk sale
described above.
General and administrative expenses decreased by 27% to $2,436,000 in the 2000
period from $3,334,000 in the 1999 period and is a result of the Company's cost
savings program which began in April 2000.
Interest and debt expense decreased by $309,000 to $449,000 from $758,000 due
to higher interest earned on producers advances offset in part by higher
interest on increased borrowings.
The Company had a loss from continuing operations before tax of ($1,320,000) in
2000 compared with income of $746,000 in 1999. The increased loss in 2000
primarily resulted from lower sales levels.
The loss from continuing operations in 2000 was $792,000 after a tax benefit of
$528,000 compared with income of $439,000 in 1999, net of a provision for taxes
of $307,000.
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30, 1999
Revenues decreased by 19% to $15,878,000 for the six months ended June 30, 2000
from $19,519,000 for the same period in 1999. The principal decrease was in
licensing revenue which decreased by 41% in the six months ended June 30, 2000
to $5,249,000 from $8,849,000 in the 1999 six month period. The decrease was
confined to the second quarter of 2000 which is explained above. Home video
revenue decreased slightly in the six months ended June 30, 2000 but includes a
bulk sale of inventory which offset a decline in sell through sales as
described above.
Licensing and distribution costs decreased by $645,000 (16%) in the 2000 six
month period due to reduced amortization and royalty expense related to the
lower revenue level.
General and administrative expense decreased by 11% to $5,202,000 in the 2000
six month period from $5,842,000 in the 1999 period as a result of the
Company's cost savings program which began in April 2000.
<PAGE>
Interest and debt expense decreased by $222,000 to $1,088,000 from $1,310,000
due to higher interest earned on producers advances offset in part by higher
interest on increased borrowings.
The Company had a loss from continuing operations before taxes of $765,000 in
2000 compared to income of $1,623,000 in 1999. The loss in 2000 is primarily
related to lower revenue levels.
The loss from continuing operations in 2000 was $470,000, after a tax benefit
of $295,000 compared with income of $947,000 in 1999, net of a provision of
taxes of $676,000.
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement 139 ("SFAS 139") which recinds FASB Statement 53 on financial
reporting by motion picture film producers or distributors. SFAS 139 requires
public companies to follow the guidance provided by Statement of Positions 00-2
("SOP 00-2") "Accounting by Producers or Distributors of Films" which is
effective for fiscal years beginning after December 15, 2000. SOP 00-2
established new film accounting standards, including changes in revenue
recognition and accounting for advertising, development and overhead costs.
Under the new accounting standard, all exploitation costs such as advertising
expenses and marketing costs will be expensed as incurred, whereas under the
old accounting standards, these costs were capitalized and amortized over the
products' lifetime. When the new standard is adopted, the Company will be
required to record a charge for the cumulative effect of the change in
accounting principle. At the present time, the Company is not able to estimate
the amount of the charge but will be conducting a review of its accounting
records to determine the amount.
Liquidity and Capital Resources
For the six months ended June 30, 2000, operating activities provided cash of
$6,728,000. The Company used $10,347,000 in investing activities which
consisted primarily of $10,251,000 incurred in acquiring and producing new
properties for the home video rental and the licensing and distribution
markets. The additional cash requirements of $3,619,000 were met principally
from additional borrowings under the revolving line of credit of $3,224,000.
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
$4,853,000 as of June 30, 2000, 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.
The Company has a borrowing facility with General Electric Capital Corporation
("GECC") which provides for borrowings of up to $40,000,000 secured by all the
Company's property. Funding up to $26,000,000 is based on the film library and
$14,000,000 is based on eligible accounts receivable. At June 30, 2000, the
Company has borrowed $33,865,000. Mandatory repayments of the library credit
are due in quarterly installments of $500,000 beginning September 28, 2000.
<PAGE>
The Company's unaudited consolidated financial statements for June 30, 2000
have been prepared in accordance with generally accepted accounting principles
applicable to a going concern. The Company is currently in default under its
revolving credit agreement primarily as a result of an overadvance in the
amount of $1,176,000, as of August 17, 2000, based on the current eligible
accounts receivable. The Company is discussing a forebearance agreement with
GECC and currently anticipates that such an agreement will be entered into.
The terms and conditions to be included in the agreement have yet to be agreed
upon. There can be no assurance that an agreement will be concluded.
The Company has instituted a cost savings program which together with
operations that have been discontinued is expected to attain annual cost
savings in excess of $3 million. The Company is also pursuing other financing
possibilities but there can be no assurance that it will be successful. The
financial statements do not include any adjustments that might result from
this uncertainty.
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. Assuming that the Company is
able to satisfy its immediate capital needs, in all likelihood the Company will
continue to require significant capital infusions in the future. As its asset
base grows, the Company may be able to secure an increased working capital line
of credit as well as explore other film acquisition financing arrangements. The
Company may also have additional debt or equity financings.
Year 2000
The Company completed the year 2000 compliance program including testing by
December 31, 1999. The Company did not experience any disruptions to normal
operations as a result of any year 2000 rollover efforts to January 1, 2000
and will continue to monitor key dates throughout 2000 but has no expectation
that related issues will arise in the current year.
Except for the historical information contained herein, the matters discussed
are forward-looking statements that are subject to risks and uncertainties,
including the inherent unpredictability of the entertainment industry in which
a success of a product depends upon factors such as competition and audience
acceptance, which may bear little or no correlation to the Company's
production or other costs, as well as the other factors described in "FACTORS
WHICH MAY AFFECT RESULTS" contained in the Company's Annual Report on Form 10-
K for the year ended December 31, 1999 (which has been filed with the
Securities and Exchange Commission). The highlighted risks should not be
assumed to be the only things to affect the Company's future performance.
Item 3. Quantitative and Qualitative Disclosure
About Market Risk
The Company has a borrowing facility on which it incurs interest equal to
1.25% per annum above the Index Rate which was 9.5% at June 30, 2000. A 1%
change in the benchmark rate applied to the outstanding borrowings at June 30,
2000 ($33,865,000) would result in an increase or decrease in interest expense
of $339,000 per year.
Receivables from sales to foreign customers are generally denominated in U.S.
dollars. The Company has no significant foreign exchange gains or losses.
<PAGE>
PART II - OTHER INFORMATION
Items 1 and 4 are not applicable.
Item 2. Changes in Securities
(A) and (B) are not applicable.
(C) Set forth below is a description of all sales of unregistered
securities since the first quarter of 2000.
In April 2000 the Company granted a total of 225,000 common stock
purchase options to employees: 200,000 of which have an exercise price of
$1.32 per share and 25,000 of which have an exercise price of $2.32 per share.
All such options expire in April 2010. 200,000 of such options become
exercisable over a three year period based solely upon the grantee's
continuing to provide services to the Company. 25,000 of such options will
not be exercisable for 9.5 years; subject to earlier exercisability if
certain earnings thresholds are met. The options were issued pursuant to the
exemption contained in Section 4(2) of the Securities Act of 1933, as amended
(the "Act").
During April 2000 Messrs. Pearlman and Lawi agreed to purchase 100,000
and 50,000 shares of common stock of the Company valued at $1.45 per share.
Pearlman purchased the shares for cash and Lawi in exchange for an equal
aggregate amount of salary and bonus due him for 1999 and 2000. In April 2000
Messrs. Pearlman, Lawi and Back agreed to accept $25,000, $12,500 and $5,110,
respectively, of their year 2000 compensation in shares of the Company's
common stock valued at current market prices in lieu of cash. The shares are
being issued pursuant to the exemption contained in Section 4(2) of the Act.
In June 2000 the Company granted a total of 50,000 common stock purchase
options to directors of the Company, having an exercise price of $1.50 per
share and expiring on December 31, 2009. One-quarter of the options are
immediately exercisable and the remainder become exercisable over a three year
period.
In July 2000 the Company issued 955,414 shares of common stock with
respect to the conversion of 300 shares of Series B 6% Convertible Preferred
Stock ("Preferred Stock B"), which were automatically converted on the second
anniversary of their issuance according to their terms. The shares were
issued pursuant to the exemption contained in Section 3(a)(9).
In July 2000 the Company granted 260,000 common stock purchase options to
employees, of which 50,000 have an exercise price of $1.45 per share; 60,000
have an exercise price of $1.50 per share; 50,000 of which have an exercise
price of $2.00 per share; 50,000 have an exercise price of $3.00 per share;
and 50,000 have an exercise price of $3.50 per share. The options expire in
July, 2010. 110,000 of the options become exercisable over a three year
period, based solely upon the grantee's continuing to provide services to the
Company. The remaining options are not exercisable for 9.5 years, subject to
earlier exercisability if the Company's common stock attains certain price
levels.
<PAGE>
Item 3. Default Upon Senior Securities
As of August 17, 2000, the Company is in default under its revolving
credit facility with General Electric Capital Corporation ("GECC") primarily
as a result of an overadvance from GECC in the amount of approximately
$1,176,000, based upon the Company's current borrowing base. The Company is
discussing a forbearance agreement with GECC, and currently anticipates that
such an agreement will be entered into. The terms and conditions to be
included in such agreement have yet to be agreed upon.
Item 5. Other Information
The Company plans to hold its 2000 Annual Meeting of Stockholders on
October 24, 2000. Proposals that stockholders wish to include in the
Company's proxy statement and form of proxy for presentation at the next
Annual Meeting of Shareholders must be received by the Company at 200 Madison
Avenue, New York, New York 10016, Attention Michael R. Epps, Esq. prior to
September 15, 2000. The Company will be allowed to have discretionary voting
authority on any proposal that is to be presented at next year's annual
meeting, unless it receives notice of such proposal by no later than such
date.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Amendment No. 2 to Credit and Security Agreement and Waiver, dated as
of August 17, 2000, among Unapix Entertainment, Inc. and its subsidiaries, and
General Electric Capital Corporation.
27. Financial Data Schedule.
b) Reports on Form 8-K not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNAPIX ENTERTAINMENT, INC.
/s/ Cheryl Freeman August 18, 2000
--------------------------------------
Cheryl Freeman, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
10.1 Amendment No. 2 to Credit and Security Agreement and Waiver,
dated as of August 17, 2000, among Unapix Entertainment, Inc.
and its subsidiaries, and General Electric Capital
Corporation.
27 Financial Data Schedule
EXHIBIT 10.1
------------
AMENDMENT NO. 2 TO CREDIT AND SECURITY AGREEMENT AND WAIVER
This Amendment No. 2 to Credit and Security Agreement and Waiver, dated as of
August 17, 2000 (the "Amendment"), is between UNAPIX ENTERTAINMENT, INC., a
Delaware corporation ("Unapix"), UNAPIX PRODUCTIONS WEST, a California
corporation ("UPW"), FRESH DEVELOPMENT, INC., a Delaware corporation ("FDI"),
UNAPIX ONLINE, INC., a New Jersey corporation formerly known as Unapix Direct
Media, Inc. ("UOL"), GREEN LEAF ADVERTISING COMPANY, INC., a New York
corporation ("Green Leaf"), UNAPIX SYNDICATION, INC., a New York corporation
("USI") and THE JAZZ STORE, INC., a New Jersey corporation ("JSI") (Unapix,
UPW, FDI, UOL, Green Leaf, USI and ISI are sometimes collectively referred to
herein as the "Borrowers" and individually as a "Borrower"); the other Credit
Parties signatory hereto; and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation tin its individual capacity, "GE Capital), as the Lender.
A. The Borrowers, Miramar Images, Inc., a Washington corporation ("Miramar")
and the Lender have entered into a certain Credit and Security Agreement dated
as of September 28, 1999 as amended as of April 12, 2000 (the "Credit
Agreement").
B. Miramar has merged into Unapix, with Unapix being the surviving
corporation.
C. Unapix has formed a new subsidiary, Pacific Surf Productions, a California
corporation ("PSP"), and under the terms of the Credit Agreement PSP is
required to execute an Instrument of Assumption and Joinder in substantially
the form attached to the Credit Agreement as Exhibit 5.17.
D. The Borrowers have requested that the Lender amend the Credit Agreement and
waive compliance by the Borrowers with certain provisions of the Credit
Agreement, as more particularly described in this Amendment.
E. The Lender has agreed to amend the Credit Agreement on the terms and
conditions herein contained. The Lender has agreed to waive compliance with
the provisions described in paragraph D above, but on the terms and conditions
herein contained.
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NOW, THEREFORE, in consideration of the premises herein contained and for
other good and valuable consideration, the Borrowers and the Lender do hereby
mutually agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meaning given to them in the Credit Agreement.
2. Amendment.
2.1 Paragraph (b) of Annex D of the Credit Agreement is hereby restated in its
entirety as follows:
"(b) Compliance Certificates. All financial information provided by the
Borrowers pursuant to paragraph (a) above (i) as of the close of and for each
Fiscal Month shall be accompanied by a statement in reasonable detail showing
the calculations used in determining compliance with each covenant set forth
in Section 6.23, (ii) as of the close of and for each Fiscal Month to and
including December, 2000, and thereafter as of the close of and for the last
Fiscal Month of each Fiscal Quarter (commencing with the Fiscal Quarter ending
March 31, 2001), shall be accompanied by a statement in reasonable detail
showing the calculations used in determining compliance with each financial
covenant set forth on Annex F which is tested as required (each of the
statements referred to in clauses (i) and (ii) above are referred to herein as
a "Compliance Certificate"), and (iii) as of the close of and for each Fiscal
Month shall be accompanied by the certification of the Chief Financial Officer
of Borrower Representative that (A) such financial information presents fairly
in accordance with GAAP (subject to normal year-end adjustments) the financial
position and results of operations of Borrowers and their Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end of such month
and for the period then ended and (B) any other information presented
(including without limitation each Compliance Certificate) is true, correct
and complete in all material respects and that there was no Default or Event
of Default in existence as of such time or, if a Default or Event of Default
shall have occurred and be continuing, describing, the nature thereof and all
efforts undertaken to cure such Default or Event of Default."
3. Waiver, Paragraph (c) of Annex F of the Credit Agreement requires the
Borrowers to maintain minimum EBITDA on a consolidated basis for certain
12-month periods more particularly described in that paragraph. The Borrowers
have failed to maintain minimum EBITDA as required under the Credit Agreement
as in effect prior to this Amendment for certain of these 12-month periods.
The Lender hereby waives compliance by the Borrowers with paragraph (c) of
Annex F of the Credit Agreement as in effect prior to this Amendment for the
12-month period ending December 31, 1999, provided that Borrowers have
maintained on a consolidated basis, for such 12-month period, EBITDA of not
less than $19,244,000.
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4. Representations and Warranties. When the Borrowers sign this Amendment,
each Borrower represents and warrants to the Lender that: (a) giving effect to
this Amendment, as of December 31, 1999 there exists no Default or Event of
Default, (b) giving effect to this Amendment, as of December 31, 1999 the
representations and warranties of the Borrowers in the Credit Agreement and in
the other Loan Documents are each true on and as of the date hereof as if made
on and as of said date, (c) this Amendment is within such Borrower's powers,
(d) this Amendment been duly authorized by all necessary or proper corporate
and shareholder action, (e) this Amendment does not contravene any provision
of such Borrower's charter or bylaws, and (f) this Amendment does not violate
any law or regulation, or any order or decree of any court or Governmental
Authority.
5. Conditions. This Amendment will be effective upon the occurrence of the
following, in each case in a manner satisfactory to the Lender hereto, and
5.1 Receipt by the Lender of this Amendment executed by each party hereto; and
5.2 Receipt by the Lender of an Instrument of Assumption and Joinder in
substantially the form attached to the Credit Agreement as Exhibit 5.17, duly
executed and delivered by PSP.
6. Effect of Amendment. Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed. The waiver contained above shall be limited precisely as written
and relate solely to the items and times above. Nothing in this Amendment
shall be deemed to (a) constitute a waiver of compliance by any Borrower with
respect to any other term, provision or condition of the Credit Agreement or
any other instrument or agreement referred to therein or (b) prejudice any
right or remedy that the Lender may now have or may have in the future under
applicable law or instrument or agreement referred to therein.
7. Counterparts. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as
of the date first above written.
UNAPIX ENTERTAINMENT, INC., a Delaware corporation
By:
Title:
UNAPIX PRODUCTIONS WEST, a California corporation
By:
Title:
FRESH DEVELOPMENTS, INC., a Delaware corporation
By:
Title:
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UNAPIX ONLINE, INC., a New Jersey corporation
By:
Title:
GREEN LEAF ADVERTISING COMPANY, INC., a New York corporation
By:
Title:
UNAPIX SYNDICATION INC., a New York corporation
By:
Title:
THE JAZZ STORE, INC., a New Jersey corporation
By:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as Lender
By:
Title:
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