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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 SEPTEMBER 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-23958
--------------------------
CINERGI PICTURES ENTERTAINMENT INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-4247952
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2308 BROADWAY
SANTA MONICA, CALIFORNIA 90404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 315-6000
--------------------------
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. /X/ Yes / / No
As of November 14, 1997, there were 13,446,874 shares of the Registrant's
Common Stock outstanding.
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CINERGI PICTURES ENTERTAINMENT INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets --
December 31, 1996 and September 30, 1997 (unaudited). . . . . . .3
Condensed Consolidated Statements of Operations (unaudited)
for the three and nine months ended September 30,
1996 and September 30, 1997 . . . . . . . . . . . . . . . . . . .5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1996 and
September 30, 1997. . . . . . . . . . . . . . . . . . . . . . . .6
Notes to Condensed Consolidated
Financial Statements (unaudited). . . . . . . . . . . . . . . . .8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 16
Item 3. Quantitative and Qualitative Disclosures
about Market Risk . . . . . . . . . . . . . . . . . . . . . . . 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 24
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 24
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 24
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 26
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1997
------------ ------------
(unaudited)
ASSETS
Cash and cash equivalents $ 27,364,000 $ 26,073,000
Restricted cash 5,654,000 5,169,000
Accounts receivable 10,850,000 7,367,000
Accounts receivable, related parties 799,000 849,000
Film costs, less accumulated amortization 103,792,000 53,424,000
Property and equipment, at cost,
less accumulated depreciation 4,819,000 427,000
Other assets 3,270,000 2,849,000
------------ ------------
TOTAL ASSETS $156,548,000 $ 96,158,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $2,141,000 $ 3,156,000
Accrued interest 23,000 0
Accrued residuals & participations 13,045,000 13,837,000
Deferred revenue 46,568,000 2,141,000
Capital lease obligation 291,000 --
Loans payable 6,026,000 7,753,000
Notes and amounts payable
to related parties 49,747,000 53,350,000
------------ ------------
TOTAL LIABILITIES $117,841,000 $ 80,237,000
3
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, September 30,
1996 1997
----------- ------------
(unaudited)
Common Stock with certain redemption
features, $.01 par value, 744,682 (1996)
and 0 (1997) shares issued and outstanding
less notes receivable from related parties
amounting to $900,000 (1996) and $0 (1997) $2,100,000 $ --
Commitments & Contingencies (Note 4) -- --
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value,
5,000,000 shares authorized, no shares
issued and outstanding -- --
Common Stock, $.01 par value,
20,000,000 shares authorized,
13,074,533 (1996) and 13,446,874
(1997) shares issued and outstanding 131,000 135,000
Additional Paid-in Capital 65,548,000 68,095,000
Retained Deficit (29,072,000) (51,859,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 36,607,000 16,371,000
Receivable from shareholder
-- (450,000)
------------ ------------
$36,607,000 $15,921,000
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $156,548,000 $96,158,000
------------ ------------
------------ ------------
NOTE: The balance sheet at December 31, 1996 has been derived from the audited
consolidated financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principals
for complete financial statements.
See notes to condensed consolidated financial statements.
4
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
Revenues
Feature films $30,160,000 $15,649,000 $89,712,000 $59,186,000
Fee income 29,000 0 60,000 23,000
----------- ------------ ------------ ------------
30,189,000 15,649,000 89,772,000 59,209,000
Cost and expenses:
Amortization of film
costs, residuals &
participations 28,543,000 17,785,000 86,954,000 62,198,000
Selling, general &
administrative expenses 2,111,000 6,210,000 4,990,000 14,071,000
Provision for impairment
of long lived assets -- -- -- 2,665,000
----------- ------------ ------------ ------------
Operating loss (465,000) (8,346,000) (2,172,000) (19,725,000)
Interest expense -- (1,970,000) (176,000) (4,362,000)
Interest income 171,000 483,000 701,000 1,300,000
----------- ------------ ------------ ------------
Net loss $ (294,000) $ (9,833,000) $ (1,647,000) $(22,787,000)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net loss per share $(0.02) $ (0.73) $(0.12) $(1.69)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Weighted average number
of shares outstanding 14,192,000 13,447,000 14,192,000 13,448,000
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
See notes to condensed consolidated financial statements.
5
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Nine Months Ended
September 30,
1996 1997
------------- -------------
OPERATING ACTIVITIES
Net loss $( 1,647,000) $(22,787,000)
Adjustments to reconcile net loss to net
cash provided by (used in)
operating activities:
Depreciation 901,000 1,821,000
Provision for impairment of
long-lived assets -- 2,665,000
Amortization of unearned compensation 938,000 --
Film cost amortization 81,317,000 54,502,000
Changes in operating assets and liabilities:
Accounts receivable (3,786,000) 3,483,000
Accounts receivable, related parties (357,000) (50,000)
Film cost additions (65,245,000) (4,134,000)
Other assets (58,000) 421,000
Accounts payable & accrued expenses and
interest 1,198,000 992,000
Accrued residuals and
participations payable 1,212,000 792,000
Deferred revenue (21,753,000) (44,426,000)
------------- -------------
Net cash used in
operating activities ( 7,280,000) (6,721,000)
INVESTING ACTIVITIES
Purchase of property and equipment (112,000) (110,000)
Proceeds from the sale of property and equipment -- 16,000
------------- -------------
Net cash used in investing activities (112,000) (94,000)
See notes to condensed consolidated financial statements.
6
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(UNAUDITED)
Nine Months Ended
September 30,
1996 1997
------------- -------------
FINANCING ACTIVITIES
Increase in loans payable $32,196,000 $ 20,124,000
Payments on loans payable (42,396,000) (18,397,000)
Decrease in restricted cash -- 485,000
Increase in notes and amounts payable to
related parties 615,000 4,089,000
Payments on notes and amounts payable to
related parties (718,000) (486,000)
Payments on capital lease obligation (1,105,000) (291,000)
------------- -------------
Net cash (used in) provided by financing
activities (11,408,000) 5,524,000
------------- -------------
(Decrease) increase in cash (18,800,000) (1,291,000)
Cash and cash equivalents at beginning of year 29,832,000 27,364,000
------------- -------------
Cash and cash equivalents at end of period $11,032,000 $ 26,073,000
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $23,000 $ 18,400
NINE MONTHS ENDED SEPTEMBER 30, 1997
In January 1997, the Company repurchased 372,341 shares of Common Stock of the
Company in exchange for the forgiveness of a note amounting to $450,000.
NINE MONTHS ENDED SEPTEMBER 30, 1996
Visual effects equipment amounting to $1,580,000 was purchased under a capital
lease agreement.
Accrued interest of $575,000 relating to production loans owed to a third
party was offset against monies owed to the Company by such third party.
See notes to condensed consolidated financial statements.
7
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
NOTE 1 -- PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Cinergi Pictures Entertainment Inc. (the "Company" or "CPEI") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in CPEI's Annual Report on
Form 10-K for the year ended December 31, 1996 ("Annual Report") filed with the
Securities and Exchange Commission.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
NET LOSS PER COMMON SHARE. The per share data for the three and nine month
periods ended September 30, 1996 and 1997 are based on the weighted average
number of common and common share equivalents outstanding during the period.
Common Stock with certain redemption features are considered common share
equivalents. Stock options and warrants are considered common share equivalents
if dilutive.
RECENT DEVELOPMENTS. In February 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, Earnings Per Share, which is effective for
annual and interim financial statements issued for periods ending after December
15, 1997 and early adoption is not permitted. When adopted, the statement will
require restatement of prior years' earnings per share ("EPS"). SFAS No. 128
was issued to simplify the standards for calculating EPS previously found in APB
No. 15, Earnings Per Share. SFAS No. 128 replaces the presentation of primary
EPS with a presentation of basic EPS. The new rules also require dual
presentation of basic and diluted EPS on the face of the statement of operations
for companies with a complex capital structure. For the Company, basic EPS will
exclude the dilutive effects of stock options and warrants. Diluted EPS for the
Company will reflect all potential dilutive securities. Under the provisions of
SFAS No. 128, basic and diluted EPS would have been the same as the reported
amounts.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income.
The statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The statement applies to all enterprises that provide a
full set of general-purpose financial statements. The statement becomes
effective for all financial statements for fiscal years beginning after December
15, 1997, with earlier application permitted. Further, in June 1997, FASB
issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. The statement changes the way public companies report segment
information in annual financial statements and also requires those companies to
report selected segment information in inteirm financial reports to
shareholders. The proposal supersedes FASB Statement No. 14 on segments and
does not apply to nonpublic enterprises or to not-for-profit organizations. The
statement becomes effective for all financial statements for fiscal years
beginning after December 15, 1997, with earlier adoption permitted. The Company
does not believe the adoption of SFAS No. 130 and SFAS No. 131 will have a
material effect on the Company's financial statements.
NOTE 3 -- FILM COSTS
Film costs consist of the following:
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ ------------
Released, less amortization . . . . . $52,077,000 $36,827,000
Completed, not released . . . . . . . 37,025,000 11,529,000
In production . . . . . . . . . . . . 9,373,000 --
Development . . . . . . . . . . . . . 5,317,000 5,068,000
------------ ------------
$103,792,000 $53,424,000
------------ ------------
------------ ------------
8
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
In December 1995, the U.S. Attorney for the Central District of California
served subpoenas ("Subpoenas") on the Company relating to a grand jury
investigation of federal tax aspects of various transactions involving Andrew G.
Vajna, President, Chief Executive Officer and Chairman of the Board of Directors
of the Company, and certain other persons and entities (the "Investigation").
The Company believes the Investigation is focusing primarily on (i) the 1988 and
1989 personal tax returns of Mr. Vajna and the tax returns of certain other
persons and entities, and (ii) the ongoing audits of Mr. Vajna's tax returns
since 1990 by the Internal Revenue Service. The Company has not been identified
by the U.S. Attorney as being a target of the Investigation; however, there can
be no assurance that the Company's status will not change in the future. The
Company engaged counsel to represent it in connection with the Investigation and
is in the process of responding to the Subpoenas. Given the uncertainty of the
Investigation, there is currently no basis upon which to estimate the impact, if
any, the Investigation may have on the Company.
Pursuant to Article Tenth of the Company's Restated Certificate of
Incorporation, Article V of the Company's Bylaws, indemnity agreements entered
into between the Company and certain of its officers and directors, and the
provisions of Section 145 of the Delaware General Corporation Law, the Company
is advancing the expenses of certain of its employees, officers and directors
other than Mr. Vajna ("Indemnitees") which they may incur in connection with the
Investigation. As of November 10, 1997, the Company had advanced an aggregate of
$294,000 on behalf of the Indemnitees. The Indemnitees have undertaken to
reimburse the Company for their expenses if it is ultimately determined that
they are not entitled to be indemnified. In addition, Mr. Vajna has undertaken
to reimburse the Company under certain circumstances with respect to the
expenses of the Indemnitees. Given the current uncertainty regarding the scope
and duration of the Investigation and the amount of expenses which may be
incurred by the Indemnitees in connection with the Investigation, there is no
basis upon which to estimate the financial impact which the foregoing may have
on the Company.
On August 25, 1997, the Company settled legal proceedings brought by
Laurence Fishburne and The LOA Productions, Inc., Mr. Fishburne's loan-out
corporation ("LOA"), against the Company, a subsidiary of the Company and
Randolph M. Paul, former Senior Vice President, Business Affairs and a former
Director of the Company (the "Fishburne Litigation"). The action, for breach of
oral contract, fraud and deceit, and civil conspiracy, was originally filed on
July 11, 1994. The plaintiffs had claimed that the Company entered into an oral
contract for Mr. Fishburne to appear in the motion picture, DIE HARD WITH A
VENGEANCE, but repudiated the contract the following day. Plaintiffs claimed
damages for $1,750,000, representing the fixed compensation to which they allege
they were entitled, additional compensatory damages of up to $350,000 and
general and punitive damages.
Pursuant to the terms of the settlement, the Company paid LOA $750,000 and
entered into certain agreements with plaintiffs and an entity controlled by Mr.
Fishburne which provide the Company with
9
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
a non-exclusive option (the "Option") to acquire certain rights ("Rights") to a
play and related screenplay both written by Mr. Fishburne. The Company also
established a letter of credit in the amount of $600,000, the amount
which must be paid to the entity controlled by Mr. Fishburne if the Company does
not exercise the Option, if the Company does not meet certain other time
deadlines, or if the Company fails to match any bona fide third party offers for
the Rights. If, during the term of the Option, the Company takes certain
actions which will result in the Option becoming exclusive, exercises the
Option, or successfully matches any bona fide third party offers for the Rights,
then the Company will also incur additional obligations such as those with
respect to the financing and developing of the Rights.
The Company is a party to various other legal proceedings arising in the
ordinary course of its business. The Company does not currently believe that any
such proceedings will have a material adverse effect on the Company's operations
or financial condition.
On April 3, 1997, the Company entered into a Purchase and Sale Agreement
(as it has been amended, the "Library Sale Agreement") with Walt Disney
Pictures and Television, a subsidiary of The Walt Disney Company, to sell to
Walt Disney Pictures and Television substantially all of the films in the
Company's motion picture library and certain other assets (referred to herein
as the "Film Library Sale";"Disney" is used herein to refer to Walt Disney
Pictures and Television and/or its affiliates, including The Walt Disney
Company, as applicable). In exchange for the assets being sold to Disney,
Disney has agreed to relinquish its equity interest in the Company (555,556
shares of the Company's Common Stock and a warrant to purchase 150,000 shares
of the Company's Common Stock at an exercise price of $9.00 per share) and
cancel its outstanding loans to the Company (approximately $39,995,000 as of
September 30, 1997). In addition, Disney has agreed to assume with respect to
the films and rights therein being sold to Disney all residuals and
participation obligations, as well as all scheduled obligations relating to
the Company's existing exploitation agreements. Pursuant to the Library Sale
Agreement, Disney will pay $3,725,000 to the Company upon delivery of AN ALAN
SMITHEE FILM to Disney (a reduction of $1,275,000 from Disney's original
payment obligation pursuant to existing agreements between the Company and
Disney). To the extent that the Company receives any fixed cash minimum
guarantees with respect to AN ALAN SMITHEE FILM ("Excess Minimum Guarantees")
other than those minimum guarantees the Company has scheduled under existing
exploitation agreements with parties other than Disney, then the Company, at
the closing of the Film Library Sale, must account for and remit such Excess
Minimum Guarantees to Disney. The Company does not currently anticipate that
there will be any significant Excess Minimum Guarantees.
The film library being sold to Disney includes primarily all of the
Company's rights (except minimum guarantee payments) to the following eleven
motion pictures: MEDICINE MAN, TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE
DREDD, THE SCARLET LETTER, NIXON, EVITA (excluding soundtrack rights), AMANDA,
THE SHADOW CONSPIRACY, and AN ALAN SMITHEE FILM. Disney will also retain
overages otherwise payable to the Company by Disney after January 1, 1997 with
respect to certain distribution rights to DIE HARD WITH A VENGEANCE previously
licensed to Disney. In addition, upon consummation of
10
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
the Film Library Sale, the Company's twenty-five film domestic distribution
arrangement with Disney, under which nine films have been delivered, will be
terminated.
The Film Library Sale is subject to numerous conditions, including, among
other things, the approval of the Company's stockholders. The Library Sale
Agreement and related Film Library Sale may also be terminated by the Company or
Disney in certain circumstances, including, among other things, upon failure to
consummate the Film Library Sale by December 24, 1997. Members of the Company's
Board of Directors who are also stockholders in the Company have agreed to vote
their shares in favor of the transaction in accordance with the terms of the
Library Sale Agreement.
On April 3, 1997, the Company also announced that it did not presently
intend to commence production on any additional motion pictures (although the
Library Sale Agreement does not preclude the Company, pending consummation of
the Film Library Sale, from commencing production on films that would not be
distributed by Disney) and that it was in the process of considering its
alternatives assuming consummation of the Film Library Sale to Disney.
On July 15, 1997, the Company entered into an Assignment Agreement (as it
has been amended, the "Assignment Agreement") with Twentieth Century Fox Film
Corporation ("Fox") to sell to Fox, subject to certain conditions, the Company's
rights in DIE HARD WITH A VENGEANCE in exchange for $11,250,000 in cash. The
Company owns DIE HARD WITH A VENGEANCE with Fox. Fox controls all sequel rights
to the film, as well as distribution rights to the film in the United States,
Canada and Japan (and certain additional minor territories), and worldwide in
certain ancillary media. Pursuant to the Assignment Agreement, the Company will
relinquish the right to receive overages from those territories and media for
which Fox controls distribution rights.
Fox will receive the Company's rights in DIE HARD WITH A VENGEANCE
subject to the terms of the Company's existing exploitation agreements
relating to such rights, including the Company's agreements with Disney. The
Company, which controlled distribution rights to DIE HARD WITH A VENGEANCE in
international territories other than those for which Fox controls
distribution rights, has previously granted Disney distribution rights to the
film in a portion of those international territories. Pursuant to the
Library Sale Agreement, the Company has agreed, upon consummation of the Film
Library Sale, to relinquish overages payable by Disney after January 1, 1997
with respect to DIE HARD WITH A VENGEANCE. Pursuant to the Assignment
Agreement, the Company was still entitled to receive any overages under
its existing exploitation agreements which relate to DIE HARD WITH A
VENGEANCE and are with parties other than Disney and Fox. However, as
indicated below, the Company subsequently sold substantially all of such
remaining rights to receive DIE HARD WITH A VENGEANCE overages.
Pursuant to the Assignment Agreement, Fox will continue to be responsible
for the payment of residuals relating to distribution of the film in those
territories for which Fox currently controls distribution rights, and, as the
Company's existing exploitation agreements expire (including the Company's
agreements with Disney) and the distribution rights in those territories revert
to Fox, Fox will become responsible for the payment of residuals in the
applicable territories covered by any exploitation
11
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
agreements. The Company, however, will continue to be responsible for all
participations due to profit participants in the film (other than those
associated with distribution of the film in the territories licensed to Disney,
for which Disney is responsible). The Company currently anticipates, subject
to, among other things, actual future revenues generated by the film, that the
Company's residuals and participation obligations with respect to such film will
not exceed approximately $812,000.
The sale of the Company's rights in DIE HARD WITH A VENGEANCE to Fox is
subject to several conditions including, among other things, consummation of the
Film Library Sale to Disney and applicable approval of the Company's
stockholders. If the Library Sale Agreement terminates, the Assignment
Agreement will automatically also terminate.
In June 1997, the Company instructed its financial advisor, Jefferson
Capital Group, Ltd., to solicit cash bids from qualified buyers for the
purchase of the Company's slate of twenty-one wholly-owned development
projects. The Company received an initial bid for the development projects
of $4,750,000 (plus the reimbursement of certain of the Company's costs
related to such projects) from Mr. Vajna. Additional qualified bids were
required to be at least fifteen percent higher than the initial bid and
submitted to the Company by noon, eastern time, on August 19, 1997. As no
additional qualified bids were received by the bidding deadline, Mr. Vajna
was the prevailing bidder. The sale of such development projects to Mr.
Vajna is subject to consummation of the Film Library Sale and the
transactions contemplated by the Assignment Agreement. As the parties to the
Merger (described below) negotiated the merger consideration on the basis of
a value for such development projects equal to Mr. Vajna's bid, such
development projects will merely be part of the assets of the Company at the
time of the Merger and no separate cash consideration will be paid to the
Company for such projects.
In September 1997, Mr. Vajna, Valdina Corporation N.V. ("Valdina"), CPEI
Acquisition, Inc. ("Buyer"), a Delaware corporation wholly owned by Mr. Vajna
and Valdina, and the Company entered into an Agreement of Merger (the "Merger
Agreement") pursuant to which Buyer will be merged with and into the Company and
the Company will become wholly owned by Mr. Vajna and Valdina (the "Merger").
Valdina, a corporation organized under the laws of The Netherlands Antilles is
indirectly beneficially owned 99.8% by Mr. Vajna and 0.2% by a trust which
benefits certain persons including the son of Mr. Vajna. Pursuant to the Merger
Agreement, at the effective time of the Merger (the "Effective Time"), each
share ("Share") of Company Common Stock (other than Shares owned by Mr. Vajna or
Valdina, treasury Shares, or Shares as to which statutory dissenters' rights are
perfected) will be converted into the right to receive $2.41 in cash (the
"Purchase Price"). The Purchase Price has been adjusted upwards from an
original price of $2.30 (the "Original Purchase Price") and is subject to
potential further upward adjustment as provided in the Merger Agreement. The
Merger is subject to the satisfaction or waiver of numerous conditions, and the
Merger Agreement may be terminated and the Merger abandoned in certain
circumstances.
12
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
The Company had a "first-look" arrangement with Oliver Stone and certain of
his affiliated entities ("Stone") pursuant to which Stone submitted the Company
all theatrical motion picture projects owned or controlled by Stone for the
Company's development and consideration of possible production and, as
consideration for Stone's submitting such projects to the Company, the Company
paid certain amounts annually to Stone for overhead and development. Disney
reimbursed the Company for all amounts payable to Stone through February 10,
1997. In September 1997, the Company entered into a Termination Agreement (the
"Termination Agreement") with Stone in order to terminate the "first-look"
arrangement between the Company and Stone and their respective obligations
thereunder. Pursuant to such agreement, the Company (i) transferred to Stone
all but one of the nineteen development projects funded by the Company under the
"first look" arrangement with Stone and (ii) made certain payments to, or for
the benefit of Stone. As a result of the Termination Agreement, the Company was
relieved of $961,000 in obligations the Company otherwise would have had with
respect to the "first-look" arrangement. In the event the Film Library Sale is
not consummated, Disney would be obligated to reimburse the Company for all
amounts paid to Stone after February 10, 1997 in connection with the
"first-look" arrangement (approximately $992,000).
In 1996, the Company and Disney entered into a Financing and Distribution
Agreement whereby the Company is financially obligated to pay to Disney the
lesser of 50% of the cost of the motion picture tentatively entitled "DEEP
RISING" or $22,500,000 (the "Cost Amount"), in exchange for (i) a 50% equity
participation in such motion picture and (ii) a sales fee for international
distribution of such motion picture. Pursuant to the Library Sale Agreement,
upon consummation of the Film Library Sale, the Company (a) will no longer have
any interest in the film as it will no longer serve as sales agent with respect
to the film, (b) will relinquish its equity participation in the film and sales
fee, (c) will remit to Disney all minimum guarantees received by the Company
with respect to DEEP RISING while it served as sales agent with respect to the
film and which were not previously remitted to Disney, and (d) will no longer be
obligated to pay the Cost Amount.
The Company and Summit Entertainment N.V. ("Summit N.V.") and Summit
Entertainment L.P. ("Summit L.P.") (collectively with their affiliates,
"Summit"), international sales agents unaffiliated with the Company, have
entered into agreements dated as of September 10, 1997 (the "Summit
Agreements") which primarily provide for (i) the purchase by Summit N.V., in
exchange for the payment of $400,000 to the Company, of the Company's rights
to receive any overages from international subdistributors (other than Disney
and Fox) pursuant to the Company's existing exploitation agreements with
respect to DIE HARD WITH A VENGEANCE (other than those overages relating to
exploitation agreements with respect to the territories of Italy and
Hungary), (ii) the purchase by Summit N.V., in exchange for the payment of an
additional $400,000 to the Company, of approximately $760,000 in
miscellaneous receivables outstanding as of September 30, 1997 (not including
any receivables relating to AN ALAN SMITHEE FILM), and (iii) the termination
of Summit's sales agency relationships with the Company and the settlement of
the Company's obligations in connection therewith in exchange for an aggregate
payment by the Company to Summit (which, pursuant to an additional agreement
with Summit, includes certain amounts payable to Summit with respect to a
past Company production) of approximately $827,000. The foregoing
transactions with Summit were consummated in November 1997.
13
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
In September 1997, Cinergi Productions Inc. (California) ("CPI"), the
wholly owned subsidiary of the Company which operated the Company's visual
effects facility, shut down the operations of such facility and, subsequent
thereto, transferred the assets thereof to an unaffiliated third party (the
"Purchaser") in consideration of the assumption by the Purchaser of
approximately $900,000 in obligations and liabilities of CPI, including
certain payroll and related obligations, the agreement of the Purchaser to
manage, on behalf of CPI, the resolution of certain other CPI liabilities and
obligations, and the contribution by the Purchaser of $200,000 thereto. In
connection with this transaction, CPI also assigned to the Purchaser all of
CPI's rights, duties and obligations under a production services agreement
relating to a motion picture for which CPI had been engaged to create visual
effects. In consideration of such assignment, the Purchaser agreed to
indemnify CPI in connection with any claims or actions initiated by any third
party with respect to the production services agreement.
14
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
NOTE 5 -- PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company 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 No. 121). In April 1997, the Company
announced that (i) the Company had entered into the Library Sale Agreement with
Disney to sell to Disney substantially all of the films in the Company's motion
picture library and certain other assets, (ii) the Company did not presently
intend to commence production of any additional motion pictures, and (iii) the
Company was considering its alternatives assuming consummation of the Film
Library Sale. The Company's visual effects assets are not included in the Film
Library Sale. In light of the foregoing and due to operating losses of the
visual effects facility, the Company determined that a write-down to net
realizable value of the visual effects assets was required under SFAS No. 121.
Accordingly, the Company recognized a non-cash charge of $2,665,000 at June 30,
1997 for the impairment of the visual effects long-lived assets. The provision
for impairment was calculated based upon the excess of the carrying amount of
the visual effects assets over the estimated fair value of the visual effects
assets.
NOTE 6 -- SUBSEQUENT EVENTS AND OTHER MATTERS
On November 14, 1997, the Company paid off the outstanding balance under
its revolving credit facility (approximately $5,639,000 in principal and
accrued interest on such date). The commitment to lend under the credit
facility had previously expired in August 1997.
15
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. SUCH 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"
OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR
COMPARABLE TERMINOLOGY. THE READER IS CAUTIONED THAT ALL FORWARD-LOOKING
STATEMENTS ARE NECESSARILY SPECULATIVE AND THERE ARE CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY
FROM THOSE REFERRED TO IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY (i)
HAS ENTERED INTO AN AGREEMENT TO SELL SUBSTANTIALLY ALL OF THE FILMS IN THE
COMPANY'S MOTION PICTURE LIBRARY AND CERTAIN OTHER ASSETS TO WALT DISNEY
PICTURES AND TELEVISION, (ii) HAS ENTERED INTO AN AGREEMENT TO SELL THE
COMPANY'S RIGHTS IN DIE HARD WITH A VENGEANCE TO TWENTIETH CENTURY FOX FILM
CORPORATION, (iii) HAS CONCLUDED VARIOUS ARRANGEMENTS REGARDING CERTAIN OF
THE COMPANY'S ASSETS NOT INCLUDED IN THE TRANSACTIONS WITH DISNEY AND FOX,
AND (iv) HAS ENTERED INTO AN AGREEMENT WITH, AMONG OTHERS, ANDREW G. VAJNA,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS OF
THE COMPANY, REGARDING THE TERMS OF A MERGER THAT WOULD FOLLOW CONSUMMATION
OF THE TRANSACTIONS WITH DISNEY AND FOX. IN ADDITION, THE COMPANY ALSO HAS
ANNOUNCED THAT IT DOES NOT PRESENTLY INTEND TO COMMENCE PRODUCTION ON ANY
ADDITIONAL MOTION PICTURES. AS A RESULT, THE COMPANY'S RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED IN FUTURE PERIODS (INCLUDING
FOR THE YEAR ENDING DECEMBER 31, 1997). THE MERGER AGREEMENT AND THE
AGREEMENTS TO SELL SUBSTANTIALLY ALL OF THE FILMS IN THE COMPANY'S MOTION
PICTURE LIBRARY AND THE COMPANY'S RIGHTS IN DIE HARD WITH A VENGEANCE ARE
SUBJECT TO NUMEROUS CONDITIONS AND MAY ALSO BE TERMINATED IN CERTAIN
CIRCUMSTANCES. THE MERGER IS SUBJECT TO CONSUMMATION OF THE TRANSACTIONS
WITH DISNEY AND FOX. NO ASSURANCE CAN BE GIVEN THAT THE MERGER OR THE SALES
OF ASSETS TO DISNEY AND FOX WILL BE CONSUMMATED. 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, WITHOUT LIMITATION, THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1996, THE COMPANY'S CURRENT
REPORT ON FORM 8-K DATED APRIL 3, 1997, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON APRIL 4, 1997, THE COMPANY'S CURRENT REPORT ON FORM
8-K DATED JULY 9, 1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JULY 17, 1997, THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED AUGUST 25,
1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997,
AND THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED OCTOBER 2, 1997, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997. 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
As indicated under Note 4 to "Notes to Condensed Consolidated Financial
Statements (unaudited)" under Item 1 above, in April 1997, the Company
entered into the Library Sale Agreement with Disney, to sell to Disney
substantially all of the films in the Company's motion picture library and
certain other assets, subject to certain conditions (including the approval
of the Company's stockholders) and termination in certain circumstances,
including upon failure to consummate the Film Library Sale by December 24,
1997. Upon consummation of the Film Library Sale, the Company's twenty-five
film domestic distribution arrangement with Disney, under which nine films
have been delivered, will be terminated. As also indicated under Note 4 to
"Notes to Condensed Consolidated
16
Financial Statements (unaudited)" under Item 1 above, in July 1997, the Company
entered into the Assignment Agreement with Fox, to sell to Fox the Company's
rights in DIE HARD WITH A VENGEANCE in exchange for $11,250,000 in cash. Such
transaction is subject to several conditions including consummation of the Film
Library Sale and applicable approval of the Company's stockholders. The Company
has also announced that it does not presently intend to commence production on
any additional motion pictures. In addition to Note 4 to "Notes to Condensed
Consolidated Financial Statements (unaudited)" under Item 1 above, see the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1996, its Current Report on Form 8-K dated April 3, 1997 filed by the Company
with the Securities and Exchange Commission on April 4, 1997, its Current Report
on Form 8-K dated July 9, 1997 filed by the Company with the Securities and
Exchange Commission on July 17, 1997, the Library Sale Agreement (Exhibit 2.2
hereto), two amendments to the Library Sale Agreement (Exhibits 2.3 and 2.4
hereto), the Assignment Agreement (Exhibit 2.5 hereto) and the amendment to the
Assignment Agreement (Exhibit 2.6 hereto), for additional information regarding
the Library Sale Agreement and the Assignment Agreement and the transactions
contemplated thereby (the "Asset Sales").
Following execution of the Library Sale Agreement and the Assignment
Agreement, the Company concluded a number of arrangements with respect to
assets which were not included as part of the Asset Sales, including: (i)
nineteen development projects (the "Stone Projects") funded by the Company
under its "first look" arrangement with Oliver Stone and certain of his
affiliates ("Stone"); (ii) visual effects equipment which was part of the
Company's visual effects facility located in Lenox, Massachusetts (the
"Visual Effects Facility"); (iii) the right to receive any overages from
international subdistributors (other than Disney and Fox) pursuant to the
Company's existing exploitation agreements with respect to DIE HARD WITH A
VENGEANCE (the "International DHWV Overages"); and (iv) approximately
$760,000 in miscellaneous receivables outstanding as of September 30, 1997
(the "Miscellaneous Receivables") (not including payments to be received with
respect to AN ALAN SMITHEE FILM.
In addition, the Company solicited bids for the purchase of the Company's
slate of twenty-one wholly-owned development projects for which Mr. Vajna's bid
of $4,750,000 (plus the reimbursement of certain of the Company's costs related
to such projects) was the prevailing bid. The sale of such development projects
to Mr. Vajna is subject to consummation of the Film Library Sale and the
transactions contemplated by the Assignment Agreement. As the parties to the
Merger (described below) negotiated the merger consideration on the basis of a
value for such development projects equal to Mr. Vajna's bid, such development
projects will merely be part of the assets of the Company at the time of the
Merger and no separate cash consideration will be paid to the Company for such
projects.
As indicated under Note 4 to "Notes to Condensed Consolidated Financial
Statements (unaudited)" under Item 1 above, in September 1997, Mr. Vajna,
Valdina, CPEI Acquisition, Inc. ("Buyer"), a Delaware corporation wholly
owned by Mr. Vajna and Valdina, and the Company entered into the Merger
Agreement which provides for the Merger of Buyer with and into the Company.
As a result of the Merger, the Company will become wholly owned by Mr. Vajna
and Valdina. Valdina, a corporation organized under the laws of The
Netherlands Antilles is indirectly beneficially owned 99.8% by Mr. Vajna and
0.2% by a trust which benefits certain persons including the son of Mr. Vajna.
Pursuant to the Merger Agreement, at the Effective Time of the Merger, each
Share of Company Common Stock (other than Shares owned by Mr. Vajna or Valdina,
treasury Shares, or Shares as to which statutory dissenters' rights are
perfected) will be converted into the right to receive the Purchase Price of
$2.41 in cash. The Purchase Price has been adjusted upwards from an Original
Purchase Price of $2.30 per Share and is subject to potential further upward
adjustment as provided in the Merger
17
Agreement. See "Item 5: Other Information" under Part II of this Report. The
Merger is subject to the satisfaction or waiver of numerous conditions,
including, among others, approval of the Merger Agreement by the affirmative
vote of a majority of the Shares voted (including abstentions but excluding
broker non-votes) on a proposal to approve the Merger Agreement at a special
meeting of the Company's stockholders to be held in connection with the Merger
and the Asset Sales, without taking into account those Shares owned by Mr.
Vajna, Valdina, or any affiliate of Mr. Vajna or Valdina. The Merger is also
subject to several other conditions, including, among others, that the
transactions contemplated by both the Library Sale Agreement and the Assignment
Agreement are consummated in all material respects, and that the percentage of
Shares demanding appraisal does not exceed 15% of the Shares outstanding at the
Effective Time of the Merger. The Merger Agreement may also be terminated and
the Merger abandoned in certain circumstances including, among others, if the
parties to the Merger Agreement mutually agree, if the Company's agreement with
Disney regarding the Film Library Sale is terminated, or if the Merger is not
consummated by December 31, 1997.
The Company has filed with the Securities and Exchange Commission
preliminary proxy materials relating to the special meeting of the Company's
stockholders to be held in connection with the Merger and the Asset Sales.
Assuming all conditions to the Merger are satisfied, the Company currently
anticipates that the Merger will not be consummated until at least mid-December
1997. However, the Merger could be delayed beyond such time as a result of a
variety of factors including the time required to obtain necessary approvals.
Any delay of the Merger beyond December 31, 1997 would require the consent of
all parties to the Merger Agreement. See the Merger Agreement (Exhibit 2.1
hereto) for additional information regarding the Merger Agreement and the
transactions contemplated thereby.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
Feature film revenues decreased from $30,160,000 for the quarter ended
September 30, 1996 to $15,649,000 for the quarter ended September 30, 1997.
Feature film revenues for the quarter ended September 30, 1996 consisted mainly
of the domestic home video availability of NIXON, domestic and international
availability of AMANDA, and continuing domestic and foreign revenues from
TOMBSTONE and DIE HARD WITH A VENGEANCE. Feature film revenues for the quarter
ended September 30, 1997 resulted mainly from the domestic home video
availability of THE SHADOW CONSPIRACY and the receipt of overages with
respect to the soundtrack for EVITA (the "EVITA Soundtrack").
Amortization of film costs, residuals and participations decreased from
$28,543,000 for the quarter ended September 30, 1996 to $17,785,000 for the
quarter ended September 30, 1997 primarily due to the decrease in feature
film revenue recognized in the quarter ended September 30, 1997 as compared
to the quarter ended September 30, 1996. This amortization decrease was
reduced due to the transfer of all but one of the Stone Projects to Stone in
September 1997 as part of the settlement of the Company's "first look"
arrangement with Stone. See "Liquidity and Capital Resources." The Company
estimates the total projected revenues to be received from the exploitation
of a motion picture in all territories and media. As revenues from a motion
picture are recognized, the percentage of revenues recognized to total
projected revenues is applied to film costs for such motion picture to record
amortization. Where applicable, unamortized film costs for a picture are
written down to net realizable value for such picture based upon the
Company's appraisal of current market conditions.
Selling, general and administrative ("SG&A") expenses (excluding production
overhead costs capitalized to film costs) increased from $2,111,000 for the
quarter ended September 30, 1996 to $6,210,000 for the quarter ended September
30, 1997. The increase is due primarily to (i) no production overhead being
capitalized into film costs in the third quarter of 1997 in light of the
Company's agreements to sell the films in its motion picture library and the
Company's current intention not to
18
commence production on additional motion pictures, (ii) severance payments to
certain executive officers and other employees, (iii) payments made by the
Company to terminate certain sales agency relationships (see "Liquidity and
Capital Resources") and (iv) costs and expenses incurred by the Company in
connection with negotiation of the Asset Sales and the Merger and the
preparation of related proxy materials. In 1996 and prior periods, the Company
capitalized production overhead incurred in connection with the production of
a motion picture by adding such costs to the capitalized film costs of the
motion picture. Production overhead being capitalized to film costs was
$1,179,000 for the third quarter of 1996. The total of SG&A expenses and
production overhead costs capitalized to film costs increased from $3,290,000
for the quarter ended September 30, 1996 to $6,210,000 for the quarter ended
September 30, 1997.
Interest expense increased from $0 for the quarter ended September 30,
1996 to $1,970,000 for the quarter ended September 30, 1997 primarily because
(i) no interest expense for the quarter ended September 30, 1997 was
capitalized to film costs in light of the Company's agreements to sell the
films in its motion picture library and the Company's current intention not
to commence production on additional motion pictures and (ii) the write off
of deferred expenses in connection with the August 31, 1997 expiration of the
commitment to lend under the Company's revolving credit facility. In 1996
and prior periods, the Company capitalized applicable interest expense
incurred in connection with the production of each motion picture. The
Company determined the amount of interest expense to be capitalized to each
motion picture in production by multiplying the average cumulative film cost
of each motion picture in a given period by the overall effective interest
rate paid by the Company on the aggregate amount of debt outstanding for such
period. Interest expense, including interest capitalized to film costs,
increased from $1,678,000 for the quarter ended September 30, 1996 to
$1,970,000 for the quarter ended September 30, 1997 primarily because of the
write off of deferred expenses in connection with the August 31, 1997
expiration of the commitment to lend under the Company's revolving credit
facility.
Interest income increased from $171,000 for the quarter ended September 30,
1996 to $483,000 for the quarter ended September 30, 1997 primarily due to
higher cash balances during the third quarter of 1997 compared to the third
quarter of 1996.
As a result of the above, the Company incurred a net loss for the quarter
ended September 30, 1997 of $9,833,000 as compared to a net loss of $294,000
for the quarter ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Feature film revenues decreased from $89,712,000 for the nine months ended
September 30, 1996 to $59,186,000 for the nine months ended September 30, 1997.
Feature film revenues for the nine months ended September 30, 1996 consisted
mainly of the domestic home video availability of THE SCARLET LETTER and NIXON,
international availability of NIXON, domestic and international availability of
AMANDA, and continuing domestic and international revenues from TOMBSTONE and
DIE HARD WITH A VENGEANCE. Feature film revenues for the nine months ended
September 30, 1997 resulted mainly from
19
revenues from the theatrical release of THE SHADOW CONSPIRACY and the domestic
home video availability of EVITA and THE SHADOW CONSPIRACY and the receipt of
overages with respect to the EVITA Soundtrack.
Amortization of film costs, residuals and participations decreased from
$86,954,000 for the nine months ended September 30, 1996 to $62,198,000 for
the nine months ended September 30, 1997 primarily due to the decrease in
feature film revenue recognized for the nine months ended September 30, 1997
as compared to the nine months ended September 30, 1996. This amortization
decrease was reduced due to the transfer of all but one of the Stone Projects
to Stone in September 1997 as part of the settlement of the Company's "first
look" arrangement with Stone. See "Liquidity and Capital Resources."
SG&A expenses (excluding production overhead costs capitalized to film
costs) increased from $4,990,000 for the nine months ended September 30, 1996
to $14,071,000 for the nine months ended September 30, 1997. The increase is
due primarily to (i) no production overhead being capitalized into film costs
in the nine months ended September 30, 1997 in light of the Company's
agreements to sell the films in its motion picture library and the Company's
current intention not to commence production on additional motion pictures,
(ii) severance payments to certain executive officers and other employees,
(iii) payments made by the Company to terminate certain sales agency
relationships (see "Liquidity and Capital Resources"), (iv) costs and
expenses incurred by the Company in connection with negotiation of the Asset
Sales and the Merger and the preparation of related proxy materials, and (v)
payments made in connection with the settlement of certain litigation (see
"Item 1: Legal Proceedings under Part II of this Report). The total of SG&A
expenses and production overhead costs capitalized to film costs increased
from $9,261,000 for the nine months ended September 30, 1996 to $14,071,000
for the nine months ended September 30, 1997.
The provision for impairment of long-lived assets reflects a write down
of the Company's visual effects equipment under provisions of 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 No.
121). In April 1997, the Company announced that (i) the Company had entered
into the Library Sale Agreement with Disney to sell to Disney substantially
all of the films in the Company's motion picture library and certain other
assets, (ii) the Company did not presently intend to commence production of
any additional motion pictures and (iii) the Company was considering its
alternatives assuming consummation of the Film Library Sale. The Company's
visual effects assets are not included in the Film Library Sale. In light of
the foregoing and due to operating losses of the Visual Effects Facility, the
Company determined that a write-down to net realizable value of the visual
effects assets was required under SFAS No. 121. Accordingly, the Company
recognized a non-cash charge of $2,665,000 at June 30, 1997 for the
impairment of the visual effects long-lived assets. The provision for
impairment was calculated based upon the excess of the carrying amount of the
visual effects assets over the estimated fair value of the visual effects
assets. In September 1997, the visual effects assets were sold for aggregate
consideration approximating the book value of such assets.
Interest expense increased from $176,000 for the nine months ended
September 30, 1996 to $4,362,000 for the nine months ended September 30, 1997
primarily because no interest expense for the nine months ended September 30,
1997 was capitalized to film costs in light of the Company's agreements to sell
the films in its motion picture library and the Company's current intention not
to commence production on additional motion pictures. Interest expense,
including interest capitalized to film costs, decreased from $5,015,000 for the
nine months ended September 30, 1996 to $4,362,000 for the nine months ended
September 30, 1997 as a result of lower average outstanding production loan
balances during the nine months ended September 30, 1997 compared to the
comparable period in 1996.
Interest income increased from $701,000 for the nine months ended September
30, 1996 to $1,300,000 for the nine months ended September 30, 1997 primarily
due to higher cash balances during the nine months ended September 30, 1997
compared to the nine months ended September 30, 1996.
As a result of the above, the Company incurred a net loss for the nine
months ended September 30, 1997 of $22,787,000 as compared to a net loss of
$1,647,000 for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a $50,000,000 revolving credit facility with The Chase
Manhattan Bank and a syndicate of lenders, under which the commitment to lend
expired August 31, 1997. In light of the Company's intention not to commence
production on any additional motion pictures, the Company did not seek to
extend the commitment to lend prior to its expiration, nor has the Company
sought to obtain a new credit facility either before or after expiration of
the commitment to lend under the Credit Facility. As
20
of September 30, 1997, approximately $7,753,000 in borrowings were
outstanding under the Credit Facility, net of cash retained from the
collection of deposits of minimum guarantees. On November 14, 1997, the
Company paid off the outstanding balance under the Credit Facility
(approximately $5,639,000 in principal and accrued interest on such date).
The Company previously entered into term loan agreements with Disney to
finance a portion of the costs of COLOR OF NIGHT, THE SCARLET LETTER, NIXON, THE
SHADOW CONSPIRACY and EVITA. Each loan must be repaid with accrued interest on
or before the earlier of (i) four years after the loan proceeds are first made
available to the Company or (ii) three years after the initial domestic
theatrical release of the applicable picture. Each of these loans are secured
by rights to distribute the respective motion picture in the Americas and,
except for the term loan with respect to COLOR OF NIGHT which is personally
guaranteed by Mr. Vajna, certain other distribution rights related to other
motion pictures financed by Disney. The COLOR OF NIGHT term loan with a balance
of $4,510,000 at September 30, 1997 was scheduled to mature in May 1997,
however, Disney has agreed pursuant to the Library Sale Agreement that no
repayment of such loan or any other term loan is required unless the Library
Sale Agreement is terminated. None of the remaining currently outstanding term
loans with Disney mature in the ordinary course in the next twelve months.
At September 30, 1997, the aggregate amount outstanding under all term loans
from Disney plus accrued interest was approximately $39,995,000.
The Company also has an outstanding promissory note in favor of Valdina
which is currently due and payable and under which an aggregate of $3,511,000 in
principal and accrued interest was outstanding at September 30, 1997.
The Company and Disney have an arrangement whereby the Company is
financially obligated to pay Disney the lesser of 50% of the cost of the motion
picture currently entitled DEEP RISING or $22,500,000 (the "Cost Amount"), in
exchange for (i) a 50% equity participation in DEEP RISING, and (ii) a sales fee
for international distribution of such motion picture. Pursuant to the Library
Sale Agreement, upon consummation of the Film Library Sale, the Company (a) will
no longer have any interest in the film as it will no longer serve as sales
agent with respect to the film, (b) will relinquish its equity participation in
the film and sales fee, (c) will remit to Disney all minimum guarantees received
by the Company with respect to DEEP RISING while it served as sales agent with
respect to the film and which were not previously remitted to Disney, and (d)
will no longer be obligated to pay the Cost Amount. In the event the Film
Library Sale is not consummated, the Company currently anticipates that
21
it will have obtained sufficient advances and minimum guarantees with respect to
its interest in the film to satisfy the Cost Amount.
The Company had a "first-look" arrangement with Stone pursuant to which
Stone submitted to the Company all theatrical motion picture projects owned or
controlled by Stone for the Company's development and consideration of possible
production. As consideration for Stone's submitting such projects to the
Company, the Company paid certain amounts annually to Stone for overhead and
development. Disney reimbursed the Company for all amounts payable to Stone
through February 10, 1997. In September 1997, the Company entered into a
Termination Agreement (the "Termination Agreement") with Stone in order to
terminate the "first-look" arrangement between the Company and Stone and their
respective obligations thereunder. Pursuant to such agreement, the Company (i)
transferred to Stone all but one of the Stone Projects and (ii) made certain
payments to, or for the benefit of Stone. As a result of the Termination
Agreement, the Company was relieved of $961,000 in obligations the Company
otherwise would have had with respect to the "first-look" arrangement. In the
event the Film Library Sale is not consummated, Disney would be obligated to
reimburse the Company for all amounts paid to Stone after February 10, 1997 in
connection with the "first-look" arrangement (approximately $992,000).
The Company and Summit Entertainment N.V. ("Summit N.V.") and Summit
Entertainment L.P. ("Summit L.P.") (collectively with their affiliates,
"Summit"), international sales agents unaffiliated with the Company, have
entered into agreements dated as of September 10, 1997 (the "Summit
Agreements") which primarily provide for (i) the purchase by Summit N.V., in
exchange for the payment of $400,000 to the Company, of the Company's rights
in the International DHWV Overages (other than those relating to exploitation
agreements with respect to the territories of Italy and Hungary), (ii) the
purchase by Summit N.V., in exchange for the payment of an additional
$400,000 to the Company, of the Miscellaneous Receivables, and (iii) the
termination of Summit's sales agency relationships with the Company and the
settlement of the Company's obligations in connection therewith in exchange
for an aggregate payment by the Company to Summit (which, pursuant to an
additional agreement with Summit, includes certain amounts payable to Summit
with respect to a past Company production) of approximately $827,000
(collectively, the "Summit Transactions"). The Summit Transactions were
consummated in November 1997.
At September 30, 1997, the Company had cash on hand of approximately
$26,073,000 (exclusive of restricted cash of approximately $5,169,000 consisting
primarily of amounts due to Disney from deposits received in connection with the
international distribution of DEEP RISING pursuant to the arrangement between
the Company and Disney described above).
As the Company does not presently intend to commence production on any
additional motion pictures, management of the Company has been implementing
reductions in personnel to achieve staff size commensurate with the Company's
current level of activity. The Company has reduced the number of its full
time employees by approximately 63% (to eleven employees) since the beginning
of 1997. The Company also reduced the amount of space it leases in its
corporate headquarters building by approximately sixty percent beginning
October 1, 1997. In addition, in September 1997, Cinergi Productions Inc.
(California) ("CPI"), the wholly owned subsidiary of the Company which
operated the Company's Visual Effects Facility, shut down the operations of
such facility and, subsequent thereto, transferred the assets thereof and
certain liabilities associated therewith to an unaffiliated third party,
Mass.Illusions LLC (the "Purchaser"). CPI transferred the assets of the
Visual Effects Facility to the Purchaser in consideration of the assumption
by the Purchaser of approximately $900,000 in obligations and liabilities of
CPI, including certain payroll and related obligations, the agreement of the
Purchaser to manage, on behalf of CPI, the resolution of certain other CPI
liabilities and obligations, and the contribution by the Purchaser of
$200,000 thereto. In connection with this transaction, CPI also assigned to
the Purchaser all of CPI's rights, duties and
22
obligations under a production services agreement relating to a motion picture
for which CPI had been engaged to create visual effects. In consideration of
such assignment, the Purchaser agreed to indemnify CPI in connection with any
claims or actions initiated by any third party with respect to the production
services agreement.
The Company believes that its existing capital, funds from operations
and other available sources of capital (including cash on hand), will be
sufficient to enable the Company to fund its overhead related expenditures
and reduced level of activities pending consummation of the Asset Sales and
the Merger. Except for preparing for the special meeting of stockholders to
be held in connection with the proposed Asset Sales and Merger, and preparing
for the potential closings of the Asset Sales and the Merger, the Company
does not currently intend to engage in any significant business operations
pending consummation of the Asset Sales and the Merger. No determination has
been made by the Company as to its course of conduct in the event that the
Asset Sales and/or the Merger are not consummated, as the Company would
consider all strategic alternatives reasonably available to it at the time.
However, the Company anticipates that it is likely that significant
consideration would be given at any such time to a dissolution and winding up
of the Company pursuant to Delaware law. The Company might need to seek
additional sources of capital following the Merger or in the event the Asset
Sales and/or the Merger are not consummated, depending on the course of
action chosen to be taken, and the business operations, if any, chosen to be
conducted by the Company at such time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable, as the Securities and Exchange Commission phase-in date for
this Item with respect to the Company has not yet occurred.
23
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 25, 1997, the Company settled legal proceedings brought by
Laurence Fishburne and The LOA Productions, Inc., Mr. Fishburne's loan-out
corporation ("LOA"), against the Company, a subsidiary of the Company and
Randolph M. Paul, former Senior Vice President, Business Affairs and a former
Director of the Company (the "Fishburne Litigation"). The action, for breach of
oral contract, fraud and deceit, and civil conspiracy, was originally filed on
July 11, 1994. The plaintiffs had claimed that the Company entered into an oral
contract for Mr. Fishburne to appear in the motion picture, DIE HARD WITH A
VENGEANCE, but repudiated the contract the following day. Plaintiffs claimed
damages of $1,750,000, representing the fixed compensation to which they allege
they were entitled, additional compensatory damages of up to $350,000 and
general and punitive damages. Trial had been scheduled for August 25, 1997 in
Los Angeles Superior Court.
Pursuant to the terms of the settlement, the Company paid LOA $750,000
and entered into certain agreements with plaintiffs and an entity controlled
by Mr. Fishburne which provide the Company with a non-exclusive option (the
"Option") to acquire certain rights ("Rights") to a play and related
screenplay both written by Mr. Fishburne. The Company also established a
letter of credit in the amount of $600,000, the amount which must be paid to
the entity controlled by Mr. Fishburne if the Company does not exercise the
Option, if the Company does not meet certain other time deadlines, or if the
Company fails to match any bona fide third party offers for the Rights. If,
during the term of the Option, the Company takes certain actions which will
result in the Option becoming exclusive, exercises the Option, or
successfully matches any bona fide third party offers for the Rights, then
the Company will also incur additional obligations such as those with respect
to the financing and developing of the Rights.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
ADJUSTMENT OF MERGER CONSIDERATION TO $2.41 PER SHARE. As indicated above
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - General," certain events (described below) have occurred
between the date of the Merger Agreement and the date of the filing of this
Report which have resulted in an aggregate of $0.11 of adjustments to the
Original Purchase Price of $2.30 per Share, i.e., a Purchase Price, as of the
date of the filing of this Report, of
24
$2.41 per Share.
The Merger Agreement provides that in the event the Company enters into
an agreement (the "Stone Agreement") prior to the Adjustment Date (A) to sell
five specified Stone Projects or (B) to settle its obligations pursuant to
its first look arrangement with Stone, there will be a positive adjustment (a
"Gross Adjustment") equal to the sum of (X) the aggregate purchase price, if
any, payable to the Company pursuant to the Stone Agreement, and (Y) the
aggregate amount of liabilities and other obligations assumed or forgiven by
the purchaser (or party or parties with which the Company settles its
obligations) pursuant to the Stone Agreement. The Adjustment Date is
generally the date which is ten business days prior to the special meeting of
stockholders to be held in connection with the Asset Sales and the Merger.
As a result of the settlement of the Company's "first look" arrangement with
Stone pursuant to the Termination Agreement, the Company has been relieved of
$961,000 in obligations it would otherwise have had to Stone under such
arrangement. This has resulted in a Gross Adjustment pursuant to the Stone
Agreement of $961,000, or approximately $.0745 per Share.
The Merger Agreement also provides that in the event the sum of (A) the
aggregate amount of all monies received by the Company (as royalties or
otherwise) in respect of the EVITA Soundtrack from September 2, 1997 through
the Adjustment Date and (B) the aggregate purchase price payable to the
Company pursuant to any agreement for the sale of the EVITA Soundtrack (an
"Evita Agreement") entered into by the Company prior to the Adjustment Date,
exceeds $1,500,000 (such excess being referred to herein as the "Soundtrack
Amount"), there will be a Gross Adjustment equal to the Soundtrack Amount.
After September 2, 1997, the Company received $1,760,000 in overages with
respect to the EVITA Soundtrack, resulting in a Gross Adjustment of $260,000
or approximately $.0201 per Share. The Company is currently in discussions
regarding the sale of the EVITA Soundtrack, however, no assurances can be
given that any such sale, or any Purchase Price adjustment resulting
therefrom, will occur.
In addition, the Merger Agreement provides that in the event the aggregate
amount of monies collected by the Company in connection with certain outstanding
accounts receivable (the "Non-Alan Smithee Receivables") from July 1, 1997
through the Adjustment Date (the "Measurement Period") is in excess of
$1,573,000 (such excess amount being referred to as the "Non-Alan Smithee
Receivables Amount"), there will be a Gross Adjustment equal to the Non-Alan
Smithee Receivables Amount. The Non-Alan Smithee Receivables do not include any
receivables relating to AN ALAN SMITHEE FILM, for which there is a different
potential adjustment. As all of the Non-Alan Smithee Receivables which have not
previously been collected (i.e., the Miscellaneous Receivables) were transferred
to Summit as part of the Summit Transactions, the aggregate amount of Non-Alan
Smithee Receivables collected by the Company during the Measurement Period and
the Non-Alan Smithee Receivables Amount have become fixed (and not subject to
further adjustment) at $1,743,000 and $170,000, respectively, resulting in an
additional Gross Adjustment of $170,000 or approximately $.0132 per Share. When
considered with adjustments (discussed above) resulting from the settlement of
the "first look" arrangement with Stone and the receipt by the Company of
$1,760,000 in overages with respect to the EVITA Soundtrack and taking into
account the parties' agreement as to rounding, the total adjustment to the
Original Purchase Price was $0.11 resulting in the adjusted Purchase Price of
$2.41 per Share.
The $2.41 Purchase Price is subject to potential further upward adjustment
in certain events specified in the Merger Agreement, including in the event
additional monies are collected with respect to the EVITA Soundtrack or if the
EVITA Soundtrack is sold. The Purchase Price will also be adjusted upwards in
the event the sum of certain prescribed adjustments pertaining to the (i) the
Company's selling, general and administrative expenses from July 1, 1997 through
the Adjustment Date, (ii) the Company's ability to collect certain receivables
relating to AN ALAN SMITHEE FILM from July 1, 1997 through the Adjustment Date,
and (iii) the amount of monies contributed by the Company to, or the amount of
expenses incurred by the Company on behalf of, CPI, or the Visual Effects
Facility which was
25
operated by such subsidiary, from July 1, 1997 through the Adjustment Date, in
each case measured against certain specified amounts, results in a net positive
dollar amount.
Upon the occurrence of any subsequent event resulting in a Purchase Price
adjustment, the aggregate per share adjustment to the Purchase Price will, in
general terms, be calculated by dividing the aggregate dollar amount of the
adjustments by the total number of issued and outstanding Shares as of the
Adjustment Date (including Shares held by Mr. Vajna or Valdina, but excluding
the 555,556 Shares held by Disney which will be transferred to the Company as
part of the contemplated sale of substantially all of the films in the Company's
motion picture library to Disney), rounded off to the nearest whole penny.
Except for the adjustments set forth in the Merger Agreement, there are no other
possible positive adjustments to the Purchase Price. The Merger Agreement does
not provide for any downward adjustments to the Purchase Price.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Agreement of Merger, dated as of September 2, 1997, by and
among Andrew G. Vajna, Valdina Corporation N.V., CPEI
Acquisition Inc. and the Company. Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and Exchange
Commission on September 5, 1997.
2.2 Purchase and Sale Agreement, dated April 3, 1997, by and
between the Company and Cinergi Productions N.V. Inc. and
Walt Disney Pictures and Television Incorporated.
Incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated April 3, 1997, filed with
the Securities and Exchange Commission on April 4, 1997.
2.3 First Amendment to Purchase and Sale Agreement, dated as of
August 26, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K, dated August 25,
1997, filed with the Securities and Exchange Commission on
September 5, 1997.
2.4 Second Amendment to Purchase and Sale Agreement, dated as of
November 10, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Filed herewith.
2.5 Assignment Agreement, dated as of July 14, 1997, between
Twentieth Century Fox Film Corporation and the Company and
Cinergi Productions N.V. Inc. Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated July 9, 1997, filed with the Securities and Exchange
Commission on July 17, 1997.
2.6 Amendment to Assignment Agreement, dated August 26, 1997,
between Twentieth Century Fox Film Corporation, the Company
and Cinergi Productions N.V. Inc. Incorporated by reference
to Exhibit 2.3 to the Company's Current Report on Form
26
8-K, dated August 25, 1997, filed with the Securities and
Exchange Commission on September 5, 1997.
10.1 Termination Agreement, dated as of September 10, 1997,
between the Company and Cinergi Productions N.V. Inc., on
the one hand, and Ixtlan Corporation, Illusion Entertainment
Group, Quetzalcoatl, Inc. and Oliver Stone, on the other
hand. Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated October 2, 1997,
filed with the Securities and Exchange Commission on
October 9, 1997.
10.2 Severance Agreement, dated as of September 1, 1997, between
Warren Braverman, the Company, and Andrew G. Vajna. Filed
herewith.
10.3 Summit Agreements between, as applicable, the Company,
Cinergi Productions N.V. Inc., Cinergi Productions KFT,
Summit Export (UK) Ltd., Summit Entertainment N.V., and
Summit Entertainment L.P. Filed herewith.
10.4 Manex/Mass.Illusion Business Acquisition Agreement, dated
as of September 15, 1997, between Cinergi Productions Inc.
(California) and Mass.Illusions, LLC. Filed herewith.
27 Financial Date Schedule (filed electronically only).
Filed herewith.
b) Reports on Form 8-K.
The following reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1997:
Current Report on Form 8-K, dated July 9, 1997, filed by the Company
with the Securities and Exchange Commission on July 17, 1997
reporting under "Item 5 - Other Events": (i) execution of the
Assignment Agreement, and (ii) a change in the beneficial ownership
of the Company by Andrew G. Vajna.
Current Report on Form 8-K, dated August 25, 1997, filed by the
Company with the Securities and Exchange Commission on September 5,
1997 reporting under "Item 5 -- Other Events": (i) execution of the
Merger Agreement, (ii) execution of an amendment to the Library Sale
Agreement, (iii) settlement of the Company's litigation with
Laurence Fishburne and certain of his affiliates, (iv) execution of
an amendment to the Assignment Agreement, and (v) the reaching of an
agreement in principle with Summit regarding the sale to Summit of
the International DHWV Overages.
27
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.
CINERGI PICTURES ENTERTAINMENT INC.
November 18, 1997 By: /s/ Warren Braverman
-------------------------------------
Warren Braverman, Executive Vice
President, Chief Operating Officer
and Chief Financial Officer, signing
both in his capacity as Executive
Vice President on behalf of
Registrant and as Chief Financial
Officer of Registrant
28
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Agreement of Merger, dated as of September 2, 1997, by and
among Andrew G. Vajna, Valdina Corporation N.V., CPEI
Acquisition Inc. and the Company. Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and Exchange
Commission on September 5, 1997.
2.2 Purchase and Sale Agreement, dated April 3, 1997, by and
between the Company and Cinergi Productions N.V. Inc. and
Walt Disney Pictures and Television Incorporated.
Incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated April 3, 1997, filed with
the Securities and Exchange Commission on April 4, 1997.
2.3 First Amendment to Purchase and Sale Agreement, dated as of
August 26, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K, dated August 25,
1997, filed with the Securities and Exchange Commission on
September 5, 1997.
2.4 Second Amendment to Purchase and Sale Agreement, dated as of
November 10, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Filed herewith.
2.5 Assignment Agreement, dated as of July 14, 1997, between
Twentieth Century Fox Film Corporation and the Company and
Cinergi Productions N.V. Inc. Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated July 9, 1997, filed with the Securities and Exchange
Commission on July 17, 1997.
2.6 Amendment to Assignment Agreement, dated August 26, 1997,
between Twentieth Century Fox Film Corporation, the Company
and Cinergi Productions N.V. Inc. Incorporated by reference
to Exhibit 2.3 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and
Exchange Commission on September 5, 1997.
29
10.1 Termination Agreement, dated as of September 10, 1997,
between the Company and Cinergi Productions N.V. Inc., on
the one hand, and Ixtlan Corporation, Illusion Entertainment
Group, Quetzalcoatl, Inc. and Oliver Stone, on the other
hand. Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated October 2, 1997,
filed with the Securities and Exchange Commission on
October 9, 1997.
10.2 Severance Agreement, dated as of September 1, 1997, between
Warren Braverman, the Company, and Andrew G. Vajna. Filed
herewith.
10.3 Summit Agreements between, as applicable, the Company,
Cinergi Productions N.V. Inc., Cinergi Productions KFT,
Summit Export (UK) Ltd., Summit Entertainment N.V., and
Summit Entertainment L.P. Filed herewith.
10.4 Manex/Mass.Illusion Business Acquisition Agreement, dated
as of September 15, 1997, between Cinergi Productions Inc.
(California) and Mass.Illusions, LLC. Filed herewith.
27 Financial Date Schedule (filed electronically only).
Filed herewith.
30