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, 2001
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 0-25308
FIRST LOOK MEDIA, INC.
(f/k/a Overseas Filmgroup, Inc.)
(Exact name of Registrant as Specified in Its Charter)
Delaware 13-3751702
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8800 Sunset Blvd., Third Floor, Los Angeles, CA 90069
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, Including Area Code: (310) 855-1199
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 the past 90 days. Yes X No __
The number of shares of common stock outstanding as of August 14,
2001 was 9,803,906.
FIRST LOOK MEDIA, INC.
INDEX
Part I - Financial Information
Page
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 2001 (unaudited) and December 31, 2000........................3
Consolidated Statements of Operations (unaudited) for the three months and six months ended
June 30, 2001 and June 30, 2000.............................................................4
Consolidated Statements of Cash Flows (unaudited) for the six months ended
June 30, 2001 and June 30, 2000.............................................................5
Consolidated Statements of Comprehensive Income (unaudited) for the three months and six
months ended June 30, 2001 and June 30, 2000................................................6
Notes to Consolidated Financial Statements (unaudited)...............................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................................14
Part II - Other Information
Item 1. Legal Proceedings...................................................................................15
Item 2. Changes in Securities and Use of Proceeds...........................................................15
Item 3. Defaults Upon Senior Securities.....................................................................15
Item 4. Submission of Matters to a Vote of Security Holders.................................................15
Item 5. Other Information...................................................................................15
Item 6. Exhibits and Reports on Form 8-K....................................................................15
Signature...........................................................................................16
Exhibit Index.......................................................................................17
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST LOOK MEDIA, INC.
(formerly known as Overseas Filmgroup, Inc.)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
---- ----
(Unaudited)
(in thousands)
ASSETS:
Cash and cash equivalents $ 839 $ 832
Accounts receivable, net of allowance for doubtful
accounts of $1,100,000 29,423 26,583
Film costs, net of accumulated amortization 15,148 13,393
Other assets 1,622 1,472
------------- -----------
Total assets $ 47,032 $ 42,280
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 1,529 $ 1,411
Accrued interest payable 137 174
Deferred revenue 391 87
Payable to producers 24,164 23,587
Notes payable 11,450 7,116
------------- -----------
Total liabilities 37,671 32,375
------------- -----------
Shareholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized; 904,971 shares
issued and outstanding (Liquidation preference of $3,846,271) 1 1
Common stock, $.001 par value, 50,000,000 shares authorized; 9,848,906
shares issued; 9,803,906 shares outstanding 10 10
Additional paid in capital 30,675 30,675
Accumulated deficit (21,238) (20,694)
Treasury stock at cost, 45,000 shares (87) (87)
------------- -----------
Total shareholders' equity 9,361 9,905
------------- -----------
Total liabilities and shareholders' equity $ 47,032 $ 42,280
============= ===========
The accompanying notes are an integral part of these consolidated
financial statements.
3
FIRST LOOK MEDIA, INC.
(formerly known as Overseas Filmgroup, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
----- ----- ----- ----
(in thousands except per share data)
Revenues $ 9,759 $ 4,411 $ 20,001 $ 10,460
Expenses:
Film costs 7,219 3,352 14,580 8,008
Distribution and marketing costs 1,261 795 2,151 1,415
Selling, general and administrative 1,737 1,095 3,394 1,889
-------------- ----------- ----------- -------------
Total expenses 10,217 5,242 20,125 11,312
-------------- ------------ ----------- --------------
Loss from operations (458) (831) (124) (852)
-------------- ------------ ----------- --------------
Other income (expense):
Interest income 6 10 8 10
Interest expense (259) (543) (516) (1,062)
Other income 41 33 107 88
-------------- ------------ ----------- --------------
Net other expense (212) (500) (401) (964)
Loss before income taxes and cumulative
effect of accounting changes (670) (1,331) (525) (1,816)
-------------- ------------ ----------- --------------
Income taxes 3 19 19 92
-------------- ------------ ----------- --------------
Loss before cumulative effect of accounting
changes (673) (1,350) (544) (1,908)
Cumulative effect of accounting changes - - - (14,123)
-------------- ------------ ----------- --------------
Net loss $ (673) $ (1,350) $ (544) $ (16,031)
============== ============= =========== ==============
Basic and diluted loss per share:
---------------------------------
Loss before cumulative effect of accounting
changes (0.07) (0.21) (0.06) (0.30)
Cumulative effect of accounting changes - - - (2.19)
-------------- -------------- ----------- --------------
Net loss (0.07) (0.21) (0.06) (2.49)
============== ============== =========== ==============
Weighted average number of common share
outstanding 9,804 6,565 9,804 6,431
============== ============== ========= ===============
The accompanying notes are an integral part of these consolidated
financial statements.
4
FIRST LOOK MEDIA, INC.
(formerly known as Overseas Filmgroup, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2001 2000
---- ----
(in thousands)
Cash flows used in operating activities:
Net loss $ (544) $(16,031)
Adjustments to reconcile net loss to net
cash used in operating activities:
Cumulative effect of accounting changes -- 14,123
Film cost amortization 14,580 907
Additions to film costs (4,101) (2,377)
Payment to producers (11,657) --
Change in assets and liabilities:
Accounts receivable (2,840) 3,193
Other assets (150) (1,341)
Accounts payable and accrued expenses 81 (451)
Payable to producers -- (1,596)
Deferred income taxes -- (1,459)
Deferred revenue 304 (325)
-------- --------
Net cash used in operating activities (4,327) (2,165)
-------- --------
Cash flows from financing activities:
Sale of securities, net of expenses -- 16,696
Net borrowings (pay down) under credit facility 4,500 (12,553)
Net pay down of subordinated note payable (166) (182)
Net pay down of note payable to related party -- (650)
Restricted cash position -- 75
-------- --------
Net cash provided by financing activities 4,334 3,386
-------- --------
Net increase in cash and cash equivalents 7 1,221
Cash and cash equivalents at beginning of period 832 270
-------- --------
Cash and cash equivalents at end of period $ 839 $ 1,491
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 567 $ 1,287
======== ========
Income taxes $ 6 $ 6
======== ========
Foreign withholding taxes $ 13 $ 86
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
5
FIRST LOOK MEDIA, INC.
(formerly known as Overseas Filmgroup, Inc.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
2001 2000 2001 2000
---- ---- ---- ----
(in thousands) (in thousands)
Net loss $ (673) $ (1,350) $ (544) $ (16,031)
Unrealized holding loss on
investment available-for-sale - (488) - (1,017)
----------- ------------- ------------ -------------
Total comprehensive loss $ (673) $ (1,838) $ (544) $ (17,048)
=========== ============= ============ =============
The accompanying notes are an integral part of these consolidated
financial statements
6
FIRST LOOK MEDIA, INC.
(formerly known as Overseas Filmgroup, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements of First
Look Media, Inc. (formerly known as Overseas Filmgroup, Inc.) (the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Rule 10-01 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 adjustments) considered necessary for a fair presentation
have been reflected in these consolidated financial statements.
Operating results for the six months ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2001. Certain reclassifications have been made in
the 2000 consolidated financial statements to conform to the 2001
presentation. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000 (the
"2000 Consolidated Financial Statements").
2. Film costs consist of the following:
June 30, 2001 December 31, 2000
------------- -----------------
(in thousands)
Film costs in release net of accumulated amortization $ 11,032 $ 11,702
Film costs not yet available for release 4,116 1,691
-------------- --------------
$ 15,148 $ 13,393
============== ==============
3. In June 2000, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 00-2, "Accounting by Producers or Distributors of Films" ("SOP
00-2"). SOP 00-2 establishes new accounting standards for producers or
distributors of films, including changes in revenue recognition and
accounting for advertising, development and overhead costs.
Additionally, in June 2000, the Financial Accounting Standards Board
("FASB") issued Statement 139 ("SFAS 139") which rescinds FASB 53 on
financial reporting by motion picture film producers or distributors.
SFAS 139 requires public companies to follow the guidance provided by
SOP 00-2. The Company adopted SOP 00-2 and, as a result, in the
fiscal quarter ended June 30, 2000 recorded a one-time, pre-tax
non-cash charge of $15,582,000 ($14,123,000 net of income taxes). This
charge has been reflected in the Company's Consolidated Statements of
Operations as a cumulative effect of accounting changes, effective
January 1, 2000.
4. Segment Information
The Company manages its business in two operating segments: Motion
Picture Distribution and Television Commercial Production. The
segments were determined based upon the types of products and services
provided and sold by each segment.
The Motion Picture Distribution segment licenses, distributes, sells
and otherwise exploits distribution rights to motion pictures.
Activities include direct theatrical, video and DVD distribution in the
U.S. as well as licensing of rights to other theatrical, video and DVD
distributors and to pay, basic and free television broadcasters
7
throughout the world. The Television Commercial Production segment
produces commercials ("spots") for manufacturers and service providers
who use the commercial to promote their products and services. The
accounting policies of the segments are the same as those described
above in the summary of significant accounting policies. There have
been no inter-segment transactions during the reported period. The
Company evaluates performance based on income or loss from operations
before interest expense and taxes.
Financial information by operating segment is set forth below:
Three Months Ended June 30, 2001 Three Months Ended June 30, 2000
-------------------------------- --------------------------------
Television Television
Motion Commercial Motion Commercial
Pictures Production Totals Pictures Production Totals
------------ ------------------- ------------- ------------ --------------- ----------
(in thousands) (in thousands)
Revenues to external customers $ 9,759 $ - $ 9,759 $ 4,411 $ - $ 4,411
Loss from operations before
interest and taxes (186) (272) (458) (831) - (831)
Six Months Ended and as of June 30, 2001 Six Months Ended and as of June 30, 2001
---------------------------------------- ----------------------------------------
(in thousands) (in thousands)
Television Television
Motion Commercial Motion Commercial
Pictures Production Totals Pictures Production Totals
------------ ------------------- ------------- ------------- ------------- --------------
Revenues to external customers $ 20,001 $ - $ 20,001 $ 10,460 $ - $ 10,460
Income (loss) from operations
before interest and taxes 148 (272) (124) (852) - (852)
Total assets 46,900 132 47,032 48,272 - 48,272
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains "forward-looking statements",
including those within the meaning of the Private Securities Litigation Reform
Act of 1995. These statements may consist of any statement other than a
recitation of historical fact and can be identified by the use of
forward-looking terminology such as "may," "expect," "anticipate," "estimate,"
"intend" or "continue" or the negative thereof or other variations thereon or
comparable terminology. Please note that all forward-looking statements are
necessarily speculative and there are risks and uncertainties that could cause
actual events or results to differ materially from those referred to in such
forward-looking statements. These risks and uncertainties include, among other
things, the highly speculative and inherently risky and competitive nature of
the motion picture industry. There can be no assurance of the economic success
of any motion picture since the revenues derived from the production and
distribution of a motion picture (which do not necessarily bear a direct
correlation to the production or distribution costs incurred) depend primarily
upon its acceptance by the public, which cannot be predicted. The commercial
success of a motion picture also depends upon the quality and acceptance of
other competing films released into the marketplace at or near the same time,
the availability of alternative forms of entertainment and leisure time
activities, general economic conditions and other tangible and intangible
factors, all of which can change and cannot be predicted with certainty.
Therefore, there is a substantial risk that some or all of the motion pictures
released, distributed, financed or produced by the Company will not be
commercially successful, resulting in costs not being recouped or anticipated
profits not being realized. The Company's results of operations for the period
ended June 30, 2001 are not necessarily indicative of the results that may be
expected in future periods. Due to quarterly fluctuations in the number of
motion pictures in which the Company controls the distribution rights and which
become available for distribution (and thus, for which revenue can first be
recognized) and the number of motion pictures distributed by the Company, as
well as the unpredictable nature of audience and sub-distributor response to
motion pictures distributed by the Company, the Company's revenues, expenses and
earnings fluctuate significantly from quarter to quarter and from year to year.
In addition, for several reasons, including (i) the likelihood of continued
industry-wide increases in acquisition, production and marketing costs and (ii)
the Company's intent, based upon its ongoing strategy, to acquire rights to or
produce films which have greater production values (often as a result of larger
budgets), the Company's costs and expenses, and thus the capital required by the
Company in its operations and the associated risks may increase in the future.
Additional risks and uncertainties are discussed elsewhere in appropriate
sections of this report and in other filings made by the Company with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for its fiscal year ended December 31, 2000. The risks highlighted
above and elsewhere in this report should not be assumed to be the only things
that could affect future performance of the Company. The Company does not have a
policy of updating or revising forward-looking statements and thus it should not
be assumed that silence by management of the Company over time means that actual
events are bearing out as estimated in such forward-looking statements.
General
The operations of Overseas Filmgroup, Inc., a privately held Delaware
corporation ("Overseas Private"), were established in February 1980. The Company
was formed in December 1993 under the name "Entertainment/Media Acquisition
Corporation" for the purpose of acquiring an operating business in the
entertainment and media industry. The Company acquired Overseas Private through
a merger in October 1996 and the Company was the surviving corporation in the
merger. Immediately following the merger, the Company changed its name to
"Overseas Filmgroup, Inc." and succeeded to the operations of Overseas Private.
In January 2001, the Company changed its name to "First Look Media, Inc." in
order to reflect the broadening of its operations beyond foreign distribution of
independently produced feature films to additional areas such as theatrical and
video distribution in the United States, television commercial production and
Internet content development.
9
Today, the Company is principally involved in the acquisition and
worldwide license or sale of distribution rights to independently produced
motion pictures. The Company directly distributes certain motion pictures in the
domestic theatrical market under the name "First Look Pictures" and in the
domestic video market under the name "First Look Home Entertainment."
Results of Operations
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Revenues increased by $5,348,000 (121.2%) to $9,759,000 for the quarter
ended June 30, 2001 from $4,411,000 for the quarter ended June 30, 2000. The
increase in revenues was primarily due to, (i) increased number of titles with
revenues over $200,000 from foreign territories and U.S. television rights
during the quarter ended June 30, 2001 (11 titles with an average of $670,000
each), compared to the quarter ended June 30, 2000 (five titles with an average
of $619,000 each), (ii) three video releases with an average of $204,000 during
the quarter ended June 30, 2001 compared to two video releases with an average
of $62,000 during the quarter ended June 30, 2000, (iii) an increase of
approximately $305,000 in airline and straight distribution revenues during the
second quarter 2001 and, (iv) an increase of approximately $70,000 in theatrical
revenue.
Film costs as a percentage of revenues decreased to 74.0% for the
quarter ended June 30, 2001 compared to 76.0% for the quarter ended June 30,
2000. Film costs include amortization of capitalized production costs as well as
accruals of participation cost for the current period. The decrease in film
costs as a percentage of revenues was primarily due to higher negotiated fees on
titles released during the quarter ended June 30, 2001 compared to quarter ended
June 30, 2000.
Distribution and marketing expenses increased to $1,261,000 for the
quarter ended June 30, 2001 compared to $795,000 for the quarter ended June 30,
2000, primarily due to the increased number of titles released on video and in
theaters as well as titles with world wide distribution rights.
Selling, general and administrative expenses, net of amounts
capitalized to film costs, increased by $642,000 (58.6%) to $1,737,000 for the
quarter ended June 30, 2001 from $1,095,000 for the quarter ended June 30, 2000.
The increase was primarily due to increases in
o salary, payroll taxes and related expenses of $424,000 due to
additional personnel;
o legal and consulting fees of $79,000;
o bad debt expense of $216,000;
o health insurance expense of $15,000;
o employee benefits of $11,000;
o rent expense of $18,000; and
o office and computer supplies of $56,000.
The above increases have been reduced by increased overhead capitalization
of $190,000 due to the Company's increased involvement in production related
activities.
Net other expense decreased by $288,000 to $212,000 for the quarter
ended June 30, 2001 compared to net other expense of $500,000 for the quarter
ended June 30, 2000. The decrease is primarily due to lower interest expense of
$284,000 as a result of lower outstanding notes payable and lower interest rates
during the quarter ended June 30, 2001, compared to the quarter ended June 30,
2000.
As a result of the above, the Company had a loss before income taxes of
$670,000 for the quarter ended June 30, 2001, compared to a loss before income
taxes of $1,331,000 for the quarter ended June 30, 2000.
The Company had a net loss of $673,000 for the quarter ended June 30,
2001 (reflecting foreign withholding taxes of $3,000), compared to a net loss of
$1,350,000 for the quarter ended June 30, 2000.
10
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Revenues increased by $9,541,000 (91.2%) to $20,001,000 for the six
months ended June 30, 2001 from $10,460,000 for the six months ended June 30,
2000. The increase in revenues was primarily due to, (i) increased number of
titles with revenues over $200,000 from foreign territories and U.S. television
rights during the six months ended June 30, 2001 (15 titles with an average of
$885,000 each), compared to the six months ended June 30, 2000 (8 titles with an
average of $880,000 each), (ii) six video releases with an average of $200,000
each for the six months ended June 30, 2001 compared to five video releases with
an average of $67,000 each for the six months ended June 30, 2000 and, (iii) an
increase of approximately $1,203,000 in airline and straight distribution
revenues during the six months ended June 30, 2001.
Film costs as a percentage of revenues decreased to 72.9% for the six
months ended June 30, 2001 compared to 76.6% for the six months ended June 30,
2000. Film costs include amortization of capitalized production costs as well as
accruals of participation cost for the current period. The decrease in film
costs as a percentage of revenues was primarily due to higher negotiated fees on
titles released during the six months ended June 30, 2001 compared to six months
ended June 30, 2000.
In accordance with the new accounting standards established pursuant to
SOP 00-2, the Company expenses all distribution and marketing expenses as
incurred. Distribution and marketing expenses increased to $2,151,000 during the
six months ended June 30, 2001 compared to $1,415,000 for the six months ended
June 30, 2000, primarily due to the increased number of titles released on video
and in theaters as well as titles with world wide distribution rights.
Selling, general and administrative expenses, net of amounts
capitalized to film costs, increased by $1,505,000 (79.7%) to $3,394,000 for the
six months ended June 30, 2001 from $1,889,000 for the six months ended June 30,
2000. The increase was primarily due to increases in:
o salary, payroll taxes and related expenses of $908,000 due to
additional personnel;
o legal and consulting fees of $169,000;
o bad debt expense of $269,000;
o health insurance expense of $27,000;
o meals and entertainment expenses of $48,000;
o publicity expenses of $41,000;
o rent expense of $18,000;
o office and computer supplies of $87,000; and
o Shipping and messenger of $13,000.
The above increases were reduced by an increase in overhead capitalization
of $73,000 due to the Company's increased involvement in production related
activities.
Net other expense for the six months ended June 30, 2001 decreased by
$563,000 to $401,000, compared to net other expense of $964,000 for the six
months ended June 30, 2000. The decrease is primarily due to lower interest
expense of $546,000 as a result of lower outstanding notes payable and lower
interest rates during the six months ended June 30, 2001, compared to the
quarter ended June 30, 2000.
As a result of the above, the Company had a loss before income taxes
and cumulative effect of accounting changes of $525,000 for the six months ended
June 30, 2001, compared to a loss before income taxes and cumulative effect of
accounting changes of $1,908,000 for the six months ended June 30, 2000.
11
The Company reported a cumulative effect of accounting changes of
$14,123,000, net of income tax benefit of $1,459,000 effective January 1, 2000,
relating to its adoption of SOP 00-2.
The Company had a net loss of $544,000 for the six months ended June
30, 2001 (reflecting foreign withholding taxes of $19,000), compared to a net
loss of $16,031,000 (including a one-time charge of cumulative effect of
accounting changes of $14,123,000) for the six months ended June 30, 2000.
Liquidity and Capital Resources
The Company requires substantial capital for the acquisition of film
rights, the funding of distribution costs and expenses, the payment of ongoing
overhead costs and the repayment of debt. The principal sources of funds for the
Company's operations have been cash flow from operations, bank borrowings and
equity financings.
June 2000 Private Placement
In June 2000, the Company consummated a private placement with Rosemary
Street Productions, LLC ("Rosemary Street"), in which the Company sold to
Rosemary Street for an aggregate cash purchase price of $17,000,000:
o 5,097,413 shares of common stock;
o 904,971 shares of Series A preferred stock, each share of
which is convertible into two shares of common stock and votes
with the common stock on an as-converted basis; and
o five-year warrants to purchase up to 2,313,810 shares of
common stock at an exercise price of $3.40 per share.
As of June 30, 2001, Rosemary Street owned approximately 53.5% of the Company's
voting securities.
Chase Facility
Concurrently with the consummation of the June 2000 private placement
with Rosemary Street, the Company entered into a $40 million credit facility
with The Chase Manhattan Bank, of which $33,000,000 had been committed through
June 6, 2001. On June 6, 2001, total commitment was increased to $40,000,000 as
a result of a new bank joining Chase and the other commercial banks and
financial institutions. A portion of the proceeds from this new credit facility
was used to refinance outstanding loans and accrued interest under the Company's
previous credit facility with Coutts & Co. and Bankgesellschaft Berlin A.G. The
remaining proceeds will be available to finance the Company's production,
acquisition, distribution and exploitation of feature length motion pictures,
television programming, video products and, for working capital and general
corporate purposes including the Company's expansion into television commercial
production.
Under the Chase facility, the Company borrows funds through loans
evidenced by promissory notes. The loans are made available through a revolving
line of credit which, may be reduced, partially or in whole, at any time and is
to be fully paid on June 20, 2005. The Chase facility also provides for letters
of credit to be issued from time to time upon the Company's request. At June 30,
2001, the Company had borrowed an aggregate of $11,000,000 under the Chase
facility.
The amounts drawn down under the Chase facility bear interest, as the
Company may select, at rates based on either LIBOR plus 2% or a rate per annum
equal to the greater of (a) the Prime Rate plus 1%, (b) the Base CD Rate plus 2%
or (c) the Federal Funds Effective Rate plus 1.5% (as these terms are defined in
the credit agreement). In addition to an annual management fee of $125,000, the
12
Company pays a commitment fee on the daily average unused portion of the Chase
facility at an annual rate of 0.5%. The Company has also paid a one-time fee of
approximately $890,000 as a cost of acquiring the Chase facility. The Chase
facility also restricts the creation or incurrence of indebtedness or issuance
of additional securities. The Chase facility is collateralized by all tangible
and intangible assets and future revenues of the Company.
In May 2001, the Company entered into an amendment to the Chase
facility, pursuant to which the requisite lenders agreed, effective as of the
date of the amendment, to:
o permit the Company to obtain financing for one film from
another lender;
o increase the Company's overhead allowance from $5 million to
$7.25 million excluding bad debt expense; and
o reduce the minimum level of Consolidated Net Worth (as defined
in the credit agreement) that the Company is required to
maintain from $28 million to $22 million.
Other Loans
In addition to the amounts outstanding under the Chase facility, during
1998 the Company borrowed $2,000,000 from another lender, the proceeds of which
were used to acquire rights to a particular film. This subordinated note bears
interest at the Prime Rate plus 1.5% and is collateralized by amounts due under
distribution agreements from the specific film. The subordinated note matures on
May 29, 2002. As of June 30, 2001, $450,000 was outstanding under the
subordinated note.
Note and Debt Contributions
Concurrently with the June 2000 private placement with Rosemary Street,
the Company entered into a note and debt contribution agreement with Robert B.
Little and Ellen Dinerman Little (collectively, the "Littles"). Pursuant to the
agreement, the Littles forgave:
o $1,339,037 of aggregate outstanding principal amount and
$480,709 of accrued but unpaid interest on a note issued by
the Company to the Littles as part of the consideration given
relating to the merger of the Company with Overseas Private in
October 1996;
o $78,101 of accrued and unpaid interest on loans in the
aggregate principal amount of $400,000 ("P&A Loans") made by
the Littles to the Company in December 1997 and February 1998,
which were used to provide a portion of the funds required by
the Company for the print and advertising costs associated
with the domestic theatrical release of Mrs. Dalloway; and
o $125,131 of accrued salaries that the Company owed to them.
The Littles also contributed $130,000 in cash and 1,588,812 of their shares of
the Company's common stock to the Company's capital and the Company paid the
Littles $1,430,000 calculated as:
o $135,476 for various reimbursable expenses as provided in
their employment agreements with the Company;
o $130,000 of the remaining principal balance on the note issued
in connection with the Company's merger with Overseas Private;
o $400,000 representing the aggregate principal amount owed by
the Company to the Littles under the P&A Loans;
13
o $564,524 of accrued salaries; and
o $200,000 representing the amount owed by the Company to the
Littles under a tax reimbursement agreement between the
Company and the Littles entered into in connection with the
Company's merger with Overseas Private.
Yahoo! Stock Sale
In July and September 2000, the Company sold for approximately
$2,056,000 all 17,454 shares of common stock of Yahoo!, Inc. that the Company
received in July 1999 as part of a share-for-share exchange with broadcast.com,
which was subsequently acquired by Yahoo!, Inc.
Resources
At June 30, 2001, the Company had cash and cash equivalents of
$839,000, compared to cash and cash equivalents of $832,000 as of December 31,
2000. At June 30, 2001, $5,372,000 was available for the Company to draw down
under the Chase facility.
The Company believes that its existing capital, funds from the Chase
facility, funds from its operations and other available sources of capital will
be sufficient to fund its operations for at least the next twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest
rates. The Company does not use derivative financial instruments. Because very
few of the Company's revenues are denominated in foreign currency, the Company
does not believe there is a significant risk imposed on the Company due to the
fluctuations in foreign currency exchange rates. The table below provides
information about the Company's debt obligations as of June 30, 2001, including
principal cash flows and related weighted average interest rates by expected
maturity dates:
Expected Maturity Date
----------------------
(in thousands)
Liabilities 2001 2002 2003 2004 2005 Thereafter
----------- ---- ---- ---- ---- ---- ----------
Variable rate:
Chase Credit Facility $ 11,000 -
Average interest rate 5.6% 5.6% 5.6% 5.6% 5.6%
Subordinated note payable $ 450
Average interest rate 8.25%
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is engaged in legal proceedings incidental to its normal
business activities. In the opinion of management, none of these proceedings are
material in relation to the Company's financial position.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the six months ended June 30, 2001, the Company did not make any
sales of unregistered securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 1, dated May 16, 2001 to the Credit, Security,
Guaranty and Pledge Agreement, dated as of June 20, 2000,
among the Company, as Borrower, the Guarantors named therein
and the Lenders named therein, with The Chase Manhattan Bank,
as Administrative Agent, and the Chase Manhattan Bank, as
Issuing Bank. Incorporated by reference to Exhibit 10.28 to
the Company's Report on Form 10-Q, filed with the SEC on May
23, 2001.
(b) Reports on Form 8-K
None.
15
SIGNATURE
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.
August 14, 2001
FIRST LOOK MEDIA, INC.
By: /s/ William F. Lischak
-------------------------------------------
William F. Lischak
Chief Financial Officer, Chief Operating
Officer and Secretary
EXHIBIT INDEX
Exhibit
Number Description
------ ------------
10.1 Amendment No. 1, dated May 16, 2001 to the Credit, Security, Guaranty
and Pledge Agreement, dated as of June 20, 2000, among the Company, as
Borrower, the Guarantors named therein and the Lenders named therein,
with The Chase Manhattan Bank, as Administrative Agent, and the Chase
Manhattan Bank, as Issuing Bank. Incorporated by reference to Exhibit
10.28 to the Company's Report on Form 10-Q, filed with the SEC on May
23, 2001.