FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2000
[ ] 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 ____
UNITED NATIONAL FILM CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
Colorado
84-1092589
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
6363 Christie Avenue
(510) 653-7020
Emeryville, CA 94608
(Address of Principal Executive Offices) (Issuer's telephone
number)
Check whether the issuer: (1) filed all reports required
to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
The number of shares outstanding of the issuer's Common Stock, $.001
par value,
as of June 30, 2000 was 6,866,983 shares.
1
UNITED NATIONAL FILM CORPORATION
INDEX
Page
Number
PART I -
Item 1.
Business History
3
Description of Business
4
Industry Profile
4
Item 2.
Products
4
Item 3.
Legal Proceedings
4
Item 4.
Submission of Matters to a Vote of Security Holders
4
PART II
Item 5.
Market Price for Registrant's Common Equity and
Related Stockholder Matters.
5
Item 6
Selected Financial Data.
5
Item 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
5
Item 8 - Financial Statements
9
Auditor's Report and financial statements
F-1 to F-11
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
21
PART III
Item 10.
Directors and Executive Officers
21
Item 11
Executive Compensation
21
Item 12
Security Ownership of Management
22
Item 13
Related Transactions, Changes in Securities
22
PART IV
Item 14
Exhibits, and
Reports on Form 8-K.
22
Signature
23
2
PART 1.
Item 1. Business History
United National Film Corporation, formerly known as Riverside Capital,
Inc.
("Riverside"), was formed under the laws of the State of Colorado on
July 19,
1988, in order to evaluate, structure and complete mergers with or
acquire
various prospects consisting of private companies, partnership or sole
proprietorships.
On February 28, 1989, the Company under the name Riverside completed
a public
offering of 20,500,000 Units at an offering price of $.01 per
unit. Each Units
consisted of one share of the Company's no par value common stock and
three
Class A Common Stock purchase Warrants. Each Class A Warrant entitled
the holder
to purchase, at a price of $.02, one share of Common Stock and one
Class B
Common Stock purchase Warrant until December 22, 1992. Each Class B
Warrant
entitled the holder to purchase one share of Common Stock at $.05 per
share
until December 22, 1992. The proceeds to the Company from its initial
public
offering were approximately $159,090.
On March 2, 1989, the Company made a $20,000 investment in Escalante
Capital,
Inc. ("Escalante") causing Escalante to become a wholly owned subsidiary
of the
Company. Escalante did not engage in any business activity and has
been
dissolved.
On June 19, 1989, the Company purchased an eighty percent (80%) interest
in
Fortune Mint, Inc. ("Fortune") for $75,000 in cash, subsequently selling
all of
its interest in Fortune to Heavenly Hot Dogs ("Heavenly") for 90 day
promissory
note for $75,000 and 7,000,000 restricted shares of Heavenly common
stock,
Heavenly defaulted on its note and the agreement to sell Fortune to
Heavenly was
terminated. Fortune closed down its activities and is no longer
manufacturing
candy mints. As of September 7, 1990, the Company no longer owned any
interest
in Fortune and has written off its investment.
On March 18, 1992, the Company acquired all of the issued and outstanding
shares
of United National Film Corporation in exchange for an aggregate of
407,250,000
(after giving effect to a one for two reverse split) authorized but
unissued
shares of the common stock, no par value, of Riverside. United National
Film
Corporation assisted Riverside in a business combination which resulted
in the
shareholders of United National Film Corporation owning together approximately
90% of the then issued and outstanding shares of Riverside Capital's
common
stock and Riverside holding 100% of the issued and outstanding shares
of United
National Film Corporation's common stock. No cash was acquired
by either
corporation in this merger. United National Film Corporation
became the
surviving entity.
On February 5, 1998, the Company entered into a Stock Purchase and
Exchange
Agreement with Titus Productions. Inc. ("Titus") which provided for
the
recapitalization of the Company. Pursuant to the Agreement, the Company
acquired
all of the authorized but unissued capital stock of Titus along with
all of the
common voting shares of Mr. Conrad Sprenger and Mr. L. Richard Bare
in exchange
for shares owned by Mr. Deno Paoli, Mr. Ted Mortarotti and Ms. Jody
Mortara.
Following the completion of the exchange, Mr. Paoli owned approximately
36.6%
and Mr. Mortarotti and Ms. Mortara each owned approximately 18.3% of
the issued
and outstanding shares of the Company.
On September 14, 1998, the Company purchased the worldwide rights from
Arthur L.
Stashower in the feature film entitled "Molly and Lawless John",
starring Sam
Elliott. In consideration thereof 40,000 shares of the company stock
were issued
and an agreement to pay $50,000 on January 15, 1999. Mr. Stashower
was a non
affiliated third party at the time of the transaction. Following
the completion
of the initial part of the transaction, Mr. Stashower was nominated
to the Board
of Directors. Mr. Stashower is now the Company President and has deferred
payment of the cash portion of the transaction until the Company has
completed
its financing plans.
On January 20, 1999, the company entered into an agreement with
Winner Take
All, Ltd., a California Limited Partnership to acquire all the assets
of the
Partnership, consisting of all rights, title and interest to the screenplay
"Winner Take All". The consideration paid for the acquisition was the
issuance
of 105,000 Shares of Common Stock divided among the limited partnership
in
accordance with their respective interests. Deno Paoli, one of the
General
Partners of Winner Take All, Ltd. and a shareholder of the Company
owning more
than 10% of the common shares of the Company, abstained from
voting and did not
receive consideration for the transfer o his partnership interest to
the
Company..
On June 9, 1999, a joint venture agreement was formed with Animation
and
Effects, a California company to produce a series of short animated
films
entitled "Snappy Sings". The joint venture will own all the rights
to "Snappy
Sings" including all copyrights. Ten per cent (10%) of the future revenues
will
be paid to Animation and Effects and ninety per cent (90%) of
the future
revenue will be paid to the Company until the sum received by the Company
equals
the amount to be advanced by the Company. Thereafter, revenues
will be shared
forty per cent (40%) to Animation and Effects and sixty per cent (60%)
to the
Company. "Snappy Sings" the first tape in the series has not
been completed due
to delay in obtaining financing. The joint venture agreement with "Animation
and
Effects" has expired and the Company is currently in negotiation for
the
extension of the agreement. The development and completion of educational
series
for children is still the goal of the Company.
On May 24, 2000 an agreement was entered into granting the Company
the
exclusive rights and option to acquire the motion picture and television
rights
in the novel written by Paul E. Erdman entitled. The Billion Dollar
Sure Thing.
The terms of the agreement provided that Paul E. Erdman will be paid
Two and
one-half per cent of the final approved budget of the motion picture
based on
the book if produced, but not less than $250,000 and not more
than $1,000,000.
In addition Mr. Erdman will be entitled to receive the sum equal to
2.5% of the
net profit derived by UTNF from the picture. The company is in
contact with
European production and investment groups for financing of this project.
There
is no assurance that financing for this picture will be secured by
the Company.
Description of Business:
The Company was formed with a mission to identify, acquire, shoot and
produce
high quality budget films conceived both by UTNF and others in order
to fill a
void in the consumer market. Our objectives and goals are to produce
quality
budget pictures in the three to ten million dollar range. From time
to time,
UTNF will acquire a project that will warrant a larger budget like
its newly
acquired original novel The Billion Dollar Sure Thing.
UTNF is continuing to acquire films for its new library. Plans call
for the
acquisition of an Internet based , interactive, entertainment
entity to
complement its efforts to provide a steady cash flow. Management is
continuing
its efforts to acquire a small to medium sized distribution company.
The Company plans to continue to finance projects it intends to produce
by
securing an advance payment by selling the distribution rights to companies
skilled in marketing independent films, Foreign sales, can bring upward
to fifty
(50) viable territories ranging from $5000 to $100,000 for the
right to
exhibit. Thru private placement partnership and joint ventures
UTNF hope to
secure additional financing. There can be no assurance the additional
financing
will be available on acceptable terms, if at all.
Industry Profile:
Technological changes are occurring at a rapid pace. Television brought
movies
into the homes and video cassettes have become a new source of income.
Each new
technological change brings new and potential sources of income. Television
stands on the cusp of a revolution as it moves from relatively
fuzzy analog
images of today to the crisp digital picture that will be available
very soon to
the public.
The motion picture industry is still a $25 to $30 billion per year business
in
the United States and Canada. Statistics show that 50% of the
average picture
revenue comes from the foreign market. New technological changes will
in the
near future change the way movies are now distributed giving more opportunities
for independent film companies to market their product. No one
knows how soon
or at what speed these changes will occur, but the film industry is
in agreement
that it will happen. In the opinion of the many, the independent film
makers
will benefit the most.
Products:
"Specific Intent" formerly called "Winner Take All" is in pre-production
stage
and was selected for the company's first feature film with a production
budget
of less than three million dollars. In the opinion of management it
has all of
the elements of a successful movie. The plot has action, suspense,
humor and
sadness. It is a script that can be filmed in 30 days, a short period
of time
for the production of feature films of this quality. The cost of production,
the
plot and its quick and easy shooting schedule were all taken in consideration
in
this decision. The company has prepared a Private Placement (A California
Limited Partnership) entitled "Specific Intent 2000 Ltd. offering l30
limited
partnership units, priced at $25,000 per unit. All of the Units are
being sold
by UTNF and it will act as the General Partner of Specific Intent 2000
Ltd.
"Gerry Was Her Code Name", a screen play has been completed and ready
for
production. This is true story of a teenage girl who risked
her life during
World War II. UTNF expects to joint venture this movie with European
Productions
Companies in order to share its cost of production. On June 28, 2000
the story
and script has been submitted to a cable company for a possible mini
series.
There is no assurance that the cable company will choose this story
over other
submitted material.
The Billion Dollar Sure Thing, a newly acquired novel is now being developed
into a screen play. The company is in contact with various financial
groups for
production of this product.
The acquired feature film "Molly and Lawless John" starring Sam Elliott
is
planned for re-distribution. Management plans to attend the International
Cinema
and Television Market held in Milan, Italy in late October and early
November to
arrange the releasing and marketing "Molly and Lawless John" in the
overseas
market place.
Item 3. Legal Proceedings:
There are no legal proceedings pending or threatened against the Company.
The
Company has commenced legal proceedings against the former vice-president
and
Secretary to cancel certain stock certificates issued to them based
on the
alleged misrepresentation made to the company be each of them which
formed the
basis of the company's initial dealing with them. There has been no
counterclaim
filed against the Company in the aforementioned lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters have been submitted to the vote of the security holders and
there are
no matters pending which will require the vote of the Security Holders.
Item 5. Market Price for Registrant's Common Equity and Related Stockholder
Matters:
The Company has 6,866,983 shares outstanding as of June 30, 2000 of
which
approximately 64% is held by insiders. During the last quarter of calendar
year
1999, the Company's common stock resumed trading on the NASDAQ electronic
bulletin board under the symbol UTNF. Holders of common stock are entitled
to
receive such dividend as may be declared by the Registrant's Board
of Directors.
No dividends have been paid with respect to the Registrant's common
stock and no
dividend is anticipated to be paid in the foreseeable future.
The following is the report of the market trading on the Company's shares
as
available;
High Low
05-18-00 through 06-30-00 $ .75 $ .25
Historical reporting of the stock prices and trades is not available
prior to
May 18, 2000, the date on which multiple market makers for the
Company's stock
became available.
Item 6. Selected Financial Data:
The following table sets forth certain selected financial data with
respect to the Company and is qualified in its entirety by reference
to
the financial statements filed herewith:
STATEMENT OF OPERATIONS
For the period ending June 30,
2000
1999
Revenues
- - 7,432
Net Loss
(263,285) ( 67,665)
Net Loss per Share
(0.04) (0.01)
Weighted Average Shares
Used in Computation
6,526,983 5,849,900
BALANCE SHEET DATA
Year Ended June 30,
Total Assets
65,227 65,413
Current Liabilities
60,400 55,000
Long Term Debt
8,000 1,500
Stockholders Equity
(2,873) 8,913
Item 7. Management's Discussion and Analysis of Financial Condition
and
Result of Operation:
It has been the goal of the company to produce high quality, low budget
motion
pictures. The management of the Company is in negotiation with Transamerica
Holding Company to complete the financial arrangement for an animation
project
"Snappy Sings". There is no assurance an agreement can be reached
and a
satisfactory conclusion can be obtained. The Company controls a number
of
screenplays and will continue to finance the individual projects through
private
offerings, partnership or joint ventures, or the pre-selling of the
project to
the overseas market. The Company has not assigned any book value to
these
projects. The management teams has over 70 years of experience in the
motion
picture business, (see management)
The Company plans to continue its project in the educational
animation market
and to finance this series by private placements or with a joint
venture,
partnership. In addition to the animation series, the Company
plans to continue
producing two features films per year and ramp up to four in the future.
The
Company plans to take steps to prepare itself to serve the Internet
market when
feasible and avail itself of all the technological opportunities. The
Company
success will be subject to its ability to raise the necessary capital.
The Company plans to research and create motion picture products
for the
anticipated Internet movie market. Low cost movies products with on
time
scheduling will be the focus and hallmark of the Company. The Company
will seek
not only quality scripts and talent but also explore new technology
to suit the
developing Internet needs of the consumer.
Results of Operation:
The following is a discussion of the results of operations from the
date
of inception through June 30, 1999. The company is not providing any
comparisons of its results of operation because the Company is still
in
the development stages, and such comparison would not be meaningful.
Net Sales:
Although the Company commenced operations on February 28, 1989, there
has been no significant income generating activity to date. The Company
records income at the time the monies are received from the distributor
of the film. Revenues from being the provider of contract production
services are recognized using the percentage of completion method,
recognizing revenue relative to the proportionate progress on such
contracts as measured by the ratio which projects costs incurred by
the
Company to date bear to the total anticipated costs advanced under
such
contracts, and are deferred and not recognized as revenue until
obligations under such contracts are performed. To date the Company
has
not produced any projects that would generate income. The source of
funds for the Company through June 30, 1999 has been from the
Acquisition of Titus Production, Inc., contract production work in
the
amount of $50,000, which Deno Paoli has sourced for the Company, and
from
loans from Officers of the Company.
Cost of Revenues:
There were no production expenditures for the company during this
reporting period.
Marketing and Sales Expenses:
There were no marketing and sales expenses during this reporting period.
Non-cash imputed compensation expense:
The Company issued 21,500 shares of Series B Convertible Preferred Stock
for
cash paid in the amount of $21,500 and issued 680,000 shares of common
stock
pursuant to several consulting agreements and 30,000 shares of common
stock to
the Directors for services rendered.
General Administrative Expenses:
General and administrative expenses not otherwise attributable to product
development and marketing expenses consist primarily of compensation,
fees for
professional services, and other general corporate purposes. General
and
administrative expenses incurred by the Company through June 30, 2000
were
$32,885. The Company expects general and administrative expenses to
significantly increase in future periods as a result of, among other
things,
increased hiring and expansion of facilities.
Interest Income:
There was interest income in the amount of $400 through June 30, 2000.
Liquidity and Capital Resources:
The Company's principal sources of liquidity were cash and cash equivalents
from
its accounts. There were no Capital Expenditures for the period ending
June 30,
2000. The Company anticipates a substantial increase in its capital
expenditures in 2000-2001 fiscal period due to commencement of production
on its
first animation project and its first film project. The Company is
actively
engaged in financing activities to raise the necessary capital to begin
production. The Company's ability to grow will depend in part on the
Company's
ability to expand its market penetration into the overseas market.
In connection
herewith, the Company may need to raise additional capital in the foreseeable
future from public or private equity or debt sources in order to avail
itself of
unanticipated opportunities. If additional funds are raised through
issuance of
equity securities, the percentage ownership of the Company's then existing
shareholders will be reduced. Moreover, shareholders may experience
additional
and significant dilution, and such equity securities may have rights,
references
or privileges senior to those of the Company's Common Stock. There
can be no
assurances that additional financing will be available on terms acceptable
to
the Company. The company may be unable to implement its business, sales
or
marketing plan, respond to competitive forces or take advantage of
perceived
business opportunities, which inability could have a material adverse
effect on
the Company's business, prospects, financial conditions and results
of
operations.
Item 8 - Financial Statements
Auditor's Report and financial statements
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page #
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements
Balance Sheets as of June 30, 2000
F-3
Statements of Operations
for the year ended June 30, 2000
F-4
Statements of Changes in Stockholders' Equity
for the years ended June 30, 2000
F-5
Statements of Cash Flows
for the year ended June 30, 2000
F-6
Notes to Consolidated Financial Statements
F-7-11
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
United National Film Corporation
We have audited the accompanying consolidated balance sheet of United
National
Film Corporation and Subsidiary as of June 30, 2000 and the related
consolidated
statements of operations, changes in stockholders' equity and cash
flows for the
years ended June 30, 2000 and 1999. These financial statements
are the
responsibility of the Company's management. Our responsibility is to
express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards.
Those standards require that we plan and perform the audit to obtain
reasonable
assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis, evidence
supporting
the amounts and disclosures in the financial statements. An audit also
includes
assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in
all material respects, the financial position of United National Film
Corporation and Subsidiary as of June 30, 2000 and the results of its
operations, changes in stockholders' equity and cash flows for the
years ended
June 30, 2000 and 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the
Company will continue as a going concern. The Company incurred
losses of
$263,285 for the year ended June 30, 2000. Additionally, the
Company had a
working capital deficiency of $59,373 at June 30, 2000. These
conditions raise
substantial doubt about the Company's ability to continue as a going
concern.
Management's plans with respect to these matters are also described
in Note 2 to
the financial statements. The accompanying financial statements
do not include
any adjustments that might result should the Company be unable to continue
as a
going concern.
/S/Feldman Sherb & Co., P. C.
FELDMAN SHERB & CO., P.C.
Certified Public Accountants
New York, New York
September 26, 2000
F-2
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
JUNE 30,2000
ASSETS
CURRENT ASSETS:
Cash
$ 1,027
FILM COSTS AND PRODUCTION RIGHTS 64,500
65,527
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued Expenses
$ 10,400
Note payable
50,000
TOTAL CURRENT LIABILITIES
60,400
LOAN FROM SHAREHOLDER 8,000
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par, 3,000,000
shares
authorized, 121,500 shares issued and
outstanding 1,215
Common stock - $.001 par, 30,000,000
shares
Authorized, 6,866,983 shares issued
and outstanding 6,867
Paid in capital 455,918
Accumulated deficit (466,873)
TOTAL STOCKHOLDERS' EQUITY (2,873)
$ 65,527
F-3
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year ending June 30
<S>
<C>
<C>
2000
1999
REVENUE
$ -
7,432
COST OF REVENUES - - 6,000
GROSS PROFIT - - 1,432
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
32,885 11,097
NON-CASH IMPUTED COMPENSATION EXPENSE
230,000 58,000
262,885 69,097
INTEREST EXPENSE (400) - -
NET LOSS (263,285) (67,665)
BASIC LOSS PER SHARE (0.04) (0.01)
WEIGHTED AVERAGE SHARES OUTSTANDING 6,526,983 5,849,900
</TABLE>
F-4
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDING JUNE 30, 1999 AND 2000
<TABLE>
<CAPTION>
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
Total
<S>
<C> <C> <C>
<C> <C> <C>
<C>
Balance June 30, 1998 100000 $1000 5461983 $5462 $133538 $(135923) 4077
Stock issued for
Services
0 0 580000 580
57420 0
58000
Stock issued pursuant
Ro agreement to acquire
Screenplay
0 0 145000 145
14355
14500
Net loss 0 0 0 0 0 ( 67665) ( 67665)
Balance, June 30,1999 100000 $1000 6186983 $6187 $205313 $(203588) $ 8912
Sale of Series B
Preferred Stock 21500
215 0
0 21500
21500
Stock issued for
Services
0 0 680000 680
229320
230000
Net Loss 0 0 0 0 0 (263285) (263285)
Balance, June 30, 2000 121500 $1215 6866983
6867 455918 (466873) (2873)
</TABLE>
F-5
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30
2000
1999
<s>
<c>
<c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (263,285) ( 67,665)
Adjustments to reconcile net loss to net cash
Provided by operating activities:
Non-cash imputed compensation
expense 230,000
58,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable 5,400
4,682
Total adjustments
235,400 62,682
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (27,885)
(4,983)
4,395
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in loan from shareholder
6,500
0
Proceeds from issuance of Preferred Stock
21,500
0
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
28,000 1,500
NET INCREASE (DECREASE) IN CASH 115 (3,483)
CASH AT BEGINNING OF PERIOD 912 4,395
CASH AT END OF PERIOD $ 1,027 912
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
During the period ended June 30,
2000 and 1999, the Company issued
680,000 and 580,000 shares of common stock, respectively, with a total
value of
$230,000 and $58,000, respectively, in exchange for consulting fees.
See notes to consolidated financial statements
F-6
UNITED NATIONAL FILM CORP. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS DESCRIPTION
United National Film Corp. and Subsidiary ("Company") is a Colorado
corporation. The Company through its subsidiary Titus Production, Inc.
("Titus") is engaged in the acquisition and development of properties
for,
and the production of, television series, television specials, made-for-
home television motion pictures and feature length motion pictures
for
domestic and international distribution.
In February 1998, pursuant to a stock purchase and exchange agreement,
the
Company acquired all of the capital stock of Titus, a Nevada Corporation
formed on January 6, 1998 in exchange for 4,000,000 shares of common
and
100,000 shares of preferred stock of the Company.
Prior to this, the Company had no operations. The acquisition of Titus
is
being accounted for as a reverse acquisition under the purchase method
of
accounting since the shareholders of Titus obtained control of the
consolidated entity. Accordingly, the merger of the two companies is
recorded as a recapitalization of Titus, with Titus treated as the
continuing entity. The historical financial statements presented
are
those of Titus.
2. GOING CONCERN
The accompanying financial statements have been prepared assuming that
the
Company will continue as a going concern. The Company incurred
losses of
$263,285 for the year ended June 30, 2000. Additionally, the
Company had
a working capital deficiency of $59,373 at June 30, 2000. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company is still developing its projects
and has
not completed any projects to generate income. The sources of
funds
generated this fiscal period have come from the issuance of preferred
stock and from loans from officer. Management is actively pursuing
new
debt and/or equity financing, however, any results of their plans and
actions cannot be assured.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
b. Film Costs and Program Rights:
Film costs and program rights ("project cost") which include
acquisition and development costs such as story rights, scenario and
scripts, direct production costs including salaries and costs of
talent, production overhead and post-production costs are stated at
the lower of cost or market and are deferred and amortized by the
"individual-film-forecast-computation method" as required by
Statement of Financial Standards No. 53.
c. Fair Value of Financial Instruments:
The carrying amounts reported in the balance sheet for cash,
accounts and notes payable and accrued expenses approximate fair
value based on the short term maturity of these instruments.
d. Principles of Consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant
intercompany balances and transactions have been eliminated.
e. Revenue Recognition:
The Company's business is to derive revenues primarily from
providing production services to third parties and exploiting
projects originally developed by the Company in which it retains an
ownership interest. Revenues from being a provider of contract
production services are recognized using the percentage of
completion method, recognizing revenue relative to the proportionate
progress on such contracts as measured by the ratio which project
costs incurred by the Company to date bear to the total anticipated
costs of each project. Amounts advanced under such contracts are
deferred and not recognized as revenue until obligations under such
contracts are performed. Revenue from licensing company-owned
projects is recognized when the film is delivered and available for
showing, costs are determinable, the fee is known and collectibility
is reasonably assured.
f. Income Taxes:
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of
assets and liabilities using the enacted tax rates in effect for the
year in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
g. Net Loss Per Common Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share", which established new standards for
computation of earnings per share. SFAS 128 requires the
presentation on the face of the income statement of "basic" earnings
per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income
(loss) available to common shareholders by the weighted average
number of outstanding common shares. The calculation of diluted
earnings per share is similar to basic earning per share except the
denominator includes dilutive common stock equivalents such as stock
options and convertible debentures. Common stock options and the
common shares underlying the convertible preferred stock are not
included as their effect would be anti-dilutive.
h. Impairment of Long-Lived Assets:
The Company has adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"). SFAS 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. The adoption of SFAS 121
did not impact the financial statements of the Company.
i. Accounting for Stock Options:
The Company adopted Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock Based Compensation". SFAS
123 encourages the use of a fair-value-based method of accounting
for stock-based awards under which the fair value of stock options
is determined on the date of the grant and expensed over the vesting
period. Under SFAS 123, companies may, however, measure compensation
costs for those plans using the method prescribed by Accounting
Principles Board Opinion No. 25 ("APB No. 25"), Accounting for Stock
Issued to Employees." Companies that apply APB No. 25 are required
to include pro forma disclosures of net earnings and earnings per
share as if the fair-value-based method of accounting had been
applied. The Company elected to account for such plans under
the
provisions of APB No. 25
4. STOCKHOLDERS' EQUITY
The Company had authorized 800,000,000 shares of no par value common
stock. The Company had 466,928,742 shares of common stock issued
and
outstanding at June 30, 1997. On February 5, 1998 the Company
consummated
a Stock Purchase and Exchange Agreement with Titus under which the
Company
acquired Titus and the previous shareholders of Titus obtained control
of
the Company. The Agreement provided for the recapitalization of the
Company through the following transactions:
a. reverse split the common stock of the Company at the ratio of
1:1000;
b. issuance of 4,000,000 shares (post split) of common stock of
the
Company to the shareholders of Titus.
c. issuance of 100,000 shares of non-voting convertible preferred
stock
(convertible into common voting stock at the ratio of 20:1) to the
shareholders of Titus.
d. the issuance of 1,000,000 shares of common stock pursuant to
several
consulting agreements, with such shares being registered in
accordance with the Securities and Exchange Act of 1933 on Form S-8.
The Company also issued 400,000 shares to various other consultants.
Accordingly, as a result of the reverse split, the acquisition of Titus
and issuance of common stock to the consultants total issued and
outstanding common shares were 5,461,983 at June 30, 1998.
Contemporaneously with the exchange transaction, the Company acquired
and
canceled 404,950 shares of Company common stock held by two shareholders.
On February 10, 1998, the Company's shareholders approved an amendment
to
the Company's certificate of incorporation to increase the authorized
number of common shares from 800,000 to 30 million and preferred shares
to
3 million. The par value is $.001 per share for common stock and $.01
per
share for preferred stock.
On February 10, 1998, the Company designated the 100,000 shares of issued
preferred stock, par value $.01, "Series A Convertible Voting Preferred
Stock" (the "Series A Preferred Stock"). The Series A Preferred
Stock has
no dividend rights. The holders have the right to convert each
share of
Series A Preferred Stock into 20 shares of common stock. Accordingly,
each share of Series A Preferred Stock is entitled to 20 votes.
In September 1998, the Company entered into an agreement to purchase
the
distribution rights to a screenplay titled, "Molly and Lawless John"
from
an unrelated third party for 40,000 shares of the Company's common
stock,
valued at $.10 per share, and $50,000.
In November 1998, the Company's Board of Directors approved the issuance
of 580,000 shares of common stock, which included 30,000 shares to
the
Company's three directors, to various consultants for services rendered
during the year. These shares have been valued at $.10 per share and
have
been accounted for as non-cash compensation expense.
In March 1999, the Company entered into an agreement to purchase a
screenplay titled "Special Intent" (originally titled "Winner Take
All")
from Winner Take All Ltd. ("WTA"), a California Partnership, in exchange
for 105,000 shares of the Company's common stock. These shares have
been
valued at $.10 per share and have been used in computing the basis
for the
acquisition. The CEO of the Company is also a general partner
of WTA.
In June 1999, the Board authorized the issuance of 200,000 shares of
Series
B Preferred Stock ("Series B") at the aggregate subscription price
of $1
per share pursuant to an offer and sale of such Series B in a Regulation
D
offering of the United States Securities Act of 1933. Holders
of the
Series B are entitled to receive a 6% annual dividend payable quarterly
in
arrears. The Series B is convertible at any time after issuance
at 50% of
the average closing bid price of the common stock or $2.00 per share,
whichever is lower when the common shares of the Company has traded
above
$4.00 per share for ten (10) consecutive trading days. In addition,
10%
of the series B carry warrants to purchase additional shares at the
same
terms.
In September, October and November 1999 the Company issued 21,500 shares
of Series B with 2,150 warrants.
In September 1999, the Company's Board of Directors approved the issuance
of 500,000 shares of common stock, which included 400,000 shares to
Company directors and to various consultants for services rendered
during
the year. These shares have been valued at $.10 per share and have
been
accounted for as non-cash compensation expense.
In November 1999, the Company's Board of Directors approved the issuance
of 180,000 shares of common stock, which included 30,000 shares to
Company
directors, and various consultants for services rendered during
the year.
These shares have been valued at $1 per share and have been accounted
for
as non-cash compensation expense.
In September, October and November 1999, the Company issued 21,500 shares
of 6% series B convertible preferred stock at $1.00, for $21,500.
5. STOCK OPTION PLAN
In February 1998, the Company adopted an incentive stock option plan
pursuant to which qualified and non-qualified stock options up to an
aggregate of 1,000,000 shares of common stock will be made available
to
selected employees, consultants, officers and directors. Options may
be
either incentive stock options or non-qualified stock options,
except that only employees may be granted incentive stock options.
Options
vest at the discretion of the Board of Directors. The maximum
term of an
option is ten years. The 1998 Stock Option Plan will terminate in February
2008, though options granted prior to termination may expire after
that
date. In Fiscal 2000, there were no grants or vesting of stock options.
In
Fiscal 1999, had compensation cost for the Stock Option Plan been
determined based on the fair value at the grant dates for awards under
the
Stock Option Plan, the Company's net loss and net loss per share would
have increased to the pro forma amounts indicated below:
Fiscal 1999
As Pro
Reported Forma
Net loss
$(67,665) $(71,665)
Basic and diluted net loss per share
$ (0.01) $ (0.01)
The fair value of each option grant is estimated on the date of grant
using the Black Scholles option-pricing method with the following weighted
average assumptions used for grants in 1999: dividend yield 0%, expected
volatility 50.0%, risk-free interest rate 5.70%, expected life in years
5.
The weighted average fair value of stock options granted during the
year
ended June 30, 1999 was $0.04.
A summary of the status of the Stock Option Plans at June 30, 2000 and
1999 and the changes during the years then ended is presented below:
2000
1999
Weighted Average
Weighted Average
Shares Exercise
Shares Exercise
Underlying Price
Underlying Price
Options
Options
Outstanding at
beginning of
year
500,000 $ 0.17
- - $ -
Granted - - - 500,000 0.17
Exercised - - - - - -
Outstanding at
end of year
500,000 0.17
500,000 0.17
Exercisable at
end of year
500,000 $ 0.17
500,000 $ 0.17
6. FILM COSTS AND PROGRAM RIGHTS
Components of film costs and program rights consist of the following:
Screenplays $ 64,500
The above film costs and program rights pertain to the screenplays "Molly
and Lawless" and "Specific Intent" (formerly "Winner Takes All").
"Molly and Lawless" is expected to be redistributed. Management
plans to
attend the International Cinema and Television Market held in Milan,
Italy
in late October and early November to arrange the releasing and marketing
of "Molly and Lawless" in the overseas market. "Specific Intent"
is in
the pre-production stage.
7. NOTE PAYABLE
Pursuant to the acquisition of the screenplay titled, "Molly and Lawless
John", a non-interest bearing was issued for $50,000, originally
due on
January 15, 1999, has been renewed for two years.
8. LOAN FROM SHAREHOLDER
Interest bearing loans made to the Company from the Chief Executive
Officer amounted to $8,000 at June 30, 2000, at an annual interest
rate of
10%.
9. INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards
No.
109, "Accounting for Income Taxes" ("SFAS 109"). Adoption of this
statement did not have a material effect of the Company's financial
statements. SFAS 109 requires the recognition of deferred tax assets
and
liabilities for both the expected impact of differences between the
financial statement and tax basis of assets and liabilities, and for
the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. SFAS 109 additionally required the establishment of
a
valuation allowance to reflect the likelihood of realization of deferred
tax assets.
Years ended June 30,
1999
Statutory federal income tax
(benefit)
$ (89,000) $ (22,000)
Effect of permanent difference
78,000 20,000
(Benefit) not recognized
11,000 2,000
Tax provision
$ - $
- -
The Company has no deferred tax assets or liabilities as of June
30, 2000.
10. JOINT VENTURE AGREEMENT
In June 1999, a joint venture agreement was entered into with a company
known as "Animation and Effects" to produce a series entitled "Snappy
Sings". The joint venture owns all the rights to "Snappy Sings",
including all copyrights. Ten per cent (10%) of future revenues go
to
Animation and Effects and ninety per cent (90%) of future revenues
to the
Company until the sum received by the Company equals the amount advanced
by the Company. Thereafter revenues to be shared are forty percent
(40%)
to Animation and Effects and sixty percent (60%) to the Company.
"Snappy
Sings," the first tape in the series has not been completed due to
delays
in obtaining financing. The joint venture agreement with "Animation
and
Effects" has expired and the Company is currently in negotiation for
the
extension of the agreement dated June 9, 1999. The development
and
completion of educational series for children is still the goal of
the
Company.
11. ACQUISITION OF "BILLION DOLLAR SURE THING" PRODUCTION RIGHTS
On May 24, 2000, an agreement was entered into granting the Company
the
exclusive rights and option to acquire the motion picture and television
rights in the novel written by Paul E. Erdman entitled "The Billion
Dollar
Sure Thing" The terms of the agreement provided that Paul E.
Erdman will
be paid 2.5% of the final approved budget of the motion picture base
on
the book if produced, but not less that $250,000 and not more than
$1,000,000. In addition, Mr. Erdman will be entitled to receive
the sum
equal to $2.5% of the net profit derived by the Company from the picture.
The Company is in contact with European production and investment groups
for financing of this project. There is no assurance that financing
for
this picture will be secured by the Company.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART II.
Directors and Executive Officers:
The company has obtained a team of seasoned executives in the
entertainment industry. The management team is comprised of Mr.
Deno
Paoli, as Chairman and Chief Executive Officer. Mr. Paoli has
over 30
years of experience in the film industry as a producer and director
and
has held senior executive management positions. Mr. Paoli served
as
producer of the film "Code Name Zebra" by Pacific West Cinema Group;
served as President of Vagabond Productions, Inc. which produced such
films as "Santee" with Glenn Ford, and served as producer and director
with World Production. Mr. Paoli served as President of Variety
International Pictures, Inc. where he was responsible for all company
business including film production and distribution.
Mr. Arthur Stashower will serve as President and Chief Operating Officer
of the Company. Mr. Stashower is an attorney who has spent his
entire
career of over 40 years practicing in the entertainment industry.
He
served as an executive in the television industry as well as with United
Artists Corporation. He has also been an executive in a talent
agency.
In his law practice Mr. Stashower has represented individuals and
companies involved in all aspects of the entertainment industry,
including actors, directors, writers, producers, production companies,
foreign sales agencies and others. He has been production counsel
for
numerous motion pictures, movies of the week and mini series.
Mr.
Stashower is a graduate of the University of Michigan and received
both
his undergraduate and law degrees there, graduating from the prestigious
University of Michigan Law School as a member of the Order of the Coif
and in the top 5% of his class.
The third member of the management team is Mr. Peter D. Finch who is
Vice President and Chief Financial Officer. Mr. Finch will be
responsible for all financial aspects of the Company. He will
work
closely with the Company auditors of Feldman Sherb Horowitz & Co.,
P.C.
of New York. Mr. Finch attended UCLA majoring in Math Physics
and San
Diego State University where he received a degree in Accounting.
Mr.
Finch served in the U.S. Army as a Captain with services in Southeast
Asia working on Classified Warfare Missions. Returning to civilian
life
he worked as a manager in the audit department of Arthur Young &
Company
and supervised audits of Fortune 1000 companies. Since 1978 he
has
worked in private practice providing business, tax and computer advice
to various corporations.
Item 11 - Executive Compensation
During the fiscal reporting year applicable hereto, the Company has
not paid
any salary to its officers. Each of the officers were issued
10,000 shares of common stock in lieu of salary during the reporting period.
Directors do
not receive compensation for their services as Directors but may be
reimbursed for their expenses in attending Directors meetings.
Item 12 - Security Ownership of Management
The following table sets forth, as of the date of this report, the stock
ownership of each officer and director individually and all directors
and
officers of the Registrant as a group.
Mr. Deno Paoli 2,010,000 29.27%
Arthur Stashower
60,000
Peter Finch
20,000
As a Group 4,000,000
73.2%
Item 13. Related Transactions, Changes in Securities.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) Exhibits
None
(b) Financial Statement Schedules
Exhibit 27.1, Financial Data Schedule is attached.
(c) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the
Registrant has duly caused this report to be signed on its behalf by
the
undersigned, thereunto duly authorized.
UNITED NATIONAL FILM CORP.
By: /s/ Deno Paoli
President
Date: September 28, 2000
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 2000 OF UNITED
NATIONAL FILM CORPORATION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-START>
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<CASH>
1,027
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<RECEIVABLES>
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