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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1998
[ ] 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, 1998 was 5,461,983 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 8
Auditor's Report and financial statements F-1 to F-9
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 9
PART III
Item 10.
Directors and Executive Officers 9
Item 11
Executive Compensation 10
Item 12
Security Ownership of Management 10
Item 13
Related Transactions, Changes in Securities 10
PART IV
Item 14
Exhibits, and
Reports on Form 8-K. 11
Signature 11
2
PART I
Item 1. Business History
United National Film Corporation (formerly known a Riverside Capital, Inc.) was
formed under the laws of the State of Colorado on July 19, 1988, in order to
evaluate, structure and complete a merger with, or acquisition of, prospects
consisting of private companies, partnerships or sole proprietorships.
On February 28, 1989, the Company completed a public offering of 20,500,000
Units at an offering price of $.01 per Unit. Each Unit consisted of one share
of the Company's no par value common stock and three Class A Common Stock
Purchase Warrants. Each 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 B Warrant entitled the holder to purchase one
share of Common Stock at $.05 per share ;until December 22, 1992. The net
proceeds to the Company from its initial public offering were approximately
$159,089.
On March 2, 1989, the company made a $20,000 investment in Escalante Capital,
Inc.("Escalante"), 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 a 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.
Due to financial difficulties, Fortune closed down its activities and is no
longer manufacturing its 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 Capital, Inc. United
National Film corporation assisted Riverside Capital, Inc. 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 Inc.'s common stock and Riverside
Capital Inc. 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 and name of Riverside Capital, Inc. was changed
to United National Film Corporation.
On February 5, 1998, the Company entered into a Stock Purchase and Exchange
Agreement with Titus Productions, Inc. ("Titus") et al. which provides for the
recapitalization of the Company. Pursuant to the Agreement, the Company
acquired all of the capital stock of Titus and the common voting shares of Mr.
Conrad Sprenger and Mr. Richard L. Bare in exchange for the distribution of
the shares to Mr. Deno Paoli, Mr. Ted Mortarotti and Ms. Jody Mortara. At
the time 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.
3
Description of Business
The Company plans to produce small budget feature motion pictures. The Company
cannot guarantee that this goal will be accomplished, as financing of motion
pictures has historically been difficult. Although no book value has been
assigned to them, the Company has various screenplays in its library which it
intends to produce. Through a process known in the industry as "packaging",
the Company will attempt to secure directors and actors to be attached to the
various screenplays at which time the plan is to attempt to finance each
package. Sources of capital are the major film studios and distribution
companies and Limited Partnerships or Private Placements. There is no
assurance that the price of the Company's common stock will increase.
Industry Profile
The size of the movie and video entertainment industry in the United States and
Canada is in excess of $26 billion per year (per Screen Digest and Motion
Picture Almanac). Although movie goers as per screen average has only enjoyed
modest growth, the video industry has more than made up for the lackluster
performances of the theaters. It was not long ago where a movie lived or died
in the theaters. It is no longer the case. After the theaters, the movie enjoys
revenues from sales or rentals in video form not only at Blockbusters,
Whereabouts, K-Mart, Wal-Mart or Target stores but even at McDonalds. It is
then be licensed to Pay Per View cable providers before moving on to premier
cable channels such as ShowTime, HBO or Cinemax. Then last to the networks and
special channels such as TBS. TNT, USA etc.
Television households have grown from 58 million households to over 96 million
in the last 15 years. The number of VCRs in use is in excess of 75 million
units or over 79% of the TV households, whereas just 15 years ago there were
only 1.8 million units in all the households. Even more staggering is the
number of pre-recorded video cassettes purchased in 1995, 490 million units
(per TV & Video Almanac) and growing at the rate of more than 10% per year.
The advent of rapid technology growth which has improved the quality of
audio and video reproduction has further spiked the demand for home
entertainment products such as pre-recorded video cassettes of full length
feature movies.
Item 2 - Products
The Company's newly acquired subsidiary, Titus Productions, is currently
developing and preparing three scripts, one of which is licensed from Winner
Take All. Ltd., a California limited partnership, for production. The licensed
property is Specific Intent. The second property is in the development stage
and is planned to be a TV sitcom, Up For Grabs. Several major studios are
interested in this project. As a result, the company may determine at a later
date that it any be more beneficial to sub-license this project to another
studio in order to realize an immediate return with less investment. The third
property is a world war II spy movie, The Silent War.
Item 3 - Legal Proceedings
There are no legal proceedings pending or threatened against the company.
Item 4 - Submission of Matters to a Vote of Security Holders.
4
On February 5, 1998, the Company entered into a Stock Purchase and Exchange
Agreement with Titus Productions, Inc. ("Titus") et al. which provides for the
recapitalization of the Company. Pursuant to the Agreement, the Company
acquired all of the capital stock of Titus and the common voting shares of
Mr. Conrad Sprenger and Mr. Richard L. Bare in exchange for the distribution
of the shares to Mr. Deno Paoli, Mr. Ted Mortarotti and Ms. Jody Mortara.
At the time 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. The foregoing transaction was approved by
a majority vote of the security holders.
There are no matters pending which will require the vote of the security
holders.
PART II
Item 5 - Market Price for Registrant's Common Equity and Related Stockholder
Matters.
The Registrant's shares were traded on the over-the-counter market until
September, 1991. Since that time, no quotations have been reported by the
National Quotation Bureau, Inc. Presently, no established public trading
market exists for the Company's securities.
Holders of common stock are entitled to receive such dividends 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 dividends are anticipated
to be paid in the foreseeable future.
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:
BALANCE SHEET DATA
At June 30, 1998
Total Assets 4395
Total Liabilities 318
Long Term Debt 0
Stockholders Equity 4077
STATEMENT OF OPERATIONS
For the period January 8, 1998-June 30,1998
Sales 50000
Loss from Operations (135923)
Net Loss (135923)
Basic loss per share (.03)
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company was formed for the purpose of producing low-budget feature motion
5
pictures. Although the Company has assigned no book value to them, it owns or
controls a variety of screenplays and television teleplays. Through an
Industry process known as "packaging", the Company intends to secure known,
marketable directors and actors to be attached to the various projects at
which time the Company will attempt to finance the individual projects.
The Company has assembled an experienced management team to develop and
implement the Company's strategic business plan. This group combines the
experience of:
- - Executives with extensive background in project acquisition and development;
- - Executives experienced in low-budget, high output production;
- - Directors with strong entrepreneurial skills and a wealth of Industry
contacts and expertise.
The Company will be filling a niche market only now being realized as a
meaningful and sizeable market within the $26 billion per year film industry,
which is the low-budget film market. The recent successes of smaller, low-
budget films, such as "The Full Monty", "Sex, Lies & Videotape", "Leaving
Las Vegas" and "The Brothers McMullen" to mention a few, have prompted most
of the large studios to get on the bandwagon. They have either acquired or
formed a smaller budget division, including, Fox, Warner Brothers and
Universal Studios. The most successful of which is Disney's early
acquisition of Miramax. This activity supports the Company's plan towards,
a well developed, low-budget screenplay, with good personnel attachments can
produce very sizeable returns. The typical budget within these low-budget
studio acquisitions has been in the $10-$20 million range, still leaving a
good sized gap in the "true" low-budget feature film market, the under $10
million dollar niche.
It is the plan of the Company to produce two films during the next year of
operation and ramp up to no more than five per year for the next three years.
The budgets are not expected to exceed $3 million per film due to the fact
that industry research has proven that there is a reasonable expectation of
recoupment of the initial investment at this level as well as a reasonable
expectation of a profit.
Although the Company has several viable projects ready for production, it can
take from 18-24 months from the beginning of production to realize any income
from a project. The Company expects that a large portion of the income derived
from it's feature films will come from the foreign market as well as cable and
video cassette releases. The first project has been scheduled for a tentative
production date of January 1999 with a second project scheduled tentatively for
spring of 1999, with first revenues expected in late 1999. The Company will be
dependent on its ability to raise the necessary capital from various financing
sources.
In addition, the Company is seeking to acquire an Internet based
interactive, entertainment company to compliment the Company's efforts as well
as to provide a steady cash flow to aid in the day-to-day functions of the
Company. Also, within the next 2 years of operations, the Company will be
seeking to acquire a small to medium sized distribution company to facilitate
the distribution of the Company's projects. The plan is to increase the cash
flow of the Company and decrease the expenses involved in the distribution of
the projects. These acquisitions would be financed by either Stock or cash
from the Company's working capital sources.
6
Results of Operation
The following is a discussion of the results of operations from the date of
inception through June 30, 1998. The company is not providing any comparisons
of its results of operations because the Company was in an early stage of
development, 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.
To date the Company has not produced any projects that would generate income
in the foreseeable future. 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 advanced under
such contracts, and are deferred and not recognized as revenue until
obligations under such contracts are performed. The sole source of funds
for the Company through June 30, 1998 has been from the acquisition of
Titus Productions, Inc., and these funds total $50,000.
Cost of Revenues
Cost of revenues include the actual cost the Company pays its vendors for the
products and charges incurred by the Company. To date there has been $34,500
of cost related to productions other than general administrative costs which
are listed below. 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 deferred and
amortized by the "individual-film-forecast-computation method" as required
by Statement of Financial Standards No. 53.
Marketing and Sales Expenses
Marketing and sales expenses consist primarily of marketing research,
market identification, trade shows, travel, entertainment, sales brochures, and
sales calls. To date there have been very minimal expenditures related to
advertising or public relations activities of the Company other than general
administrative costs which are listed below. The total expenditure to date is
$4,826.35.
Non-cash Imputed Compensation Expense
The Company issued 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.
General Administrative Expenses
General and administrative expenses not otherwise attributable to product
development and marketing expenses consist primarily of compensation, rent,
7
fees for professional services, and other general corporate purposes.
General and administrative expense incurred by the Company through June 30,
1998 was $6,597. 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 no interest income through June 30, 1998.
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 Company through June 30, 1998.
The Company anticipates a substantial increase in its capital expenditures in
1998 due to commencement of production on 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
emerging markets (Eastern Europe, China and the Pacific Rim at large). 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 or to otherwise respond to
unanticipated competitive pressures. If additional funds are raised through
issuance of equity securities, the percentage of 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, preferences 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 condition and results of operations.
Item 8 - Financial Statements
8
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, 1998 F-3
Statements of Operations
for the year ended June 30, 1998 F-4
Statements of Changes in Stockholders' Equity
for the years ended June 30, 1998 F-5
Statements of Cash Flows
for the year ended June 30, 1998 F-6
Notes to Consolidated Financial Statements F-7-9
F-1
INDEPENDENT AUDITOR'S 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 (a development stage enterprise) as
of June 30, 1998 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the period January 6, 1998
(inception) to June 30, 1998. 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 (a development stage enterprise) as of June 30,
1998 and the results of its operations, changes in stockholders' equity and
cash flows for the period January 6, 1998 (inception) to June 30, 1998 in
conformity with generally accepted accounting principles.
/S/Feldman Sherb Ehrlich & Co., P. C.
FELDMAN SHERB EHRLICH & CO.,
P.C.
Certified Public Accountants
(Formerly Feldman Radin & Co., P.C.)
New York, New York
October 2, 1998
F-2
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
JUNE 30,1998
ASSETS
CURRENT ASSETS:
Cash $ 4,395
$ 4,395
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 318
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par, 3,000,000 shares
authorized, 100,000 shares issued and outstanding 1,000
Common stock - $.001 par, 30,000,000 shares
Authorized, 5,461,983 shares issued and outstanding 5,462
Paid in capital 133,538
Accumulated deficit (135,923)
TOTAL STOCKHOLDERS' EQUITY 4,077
$ 4,395
F-3
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 6, 1998 (INCEPTION) TO JUNE 30, 1998
REVENUE $ 50,000
COST OF REVENUES 34,500
GROSS PROFIT 15,500
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 11,423
NON-CASH IMPUTED COMPENSATION EXPENSE 140,000
151,423
NET LOSS $ (135,923)
BASIC LOSS PER SHARE (0.03)
WEIGHTED AVERAGE SHARES OUTSTANDING 4,584,986
F-4
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 6, 1998 (INCEPTION) TO JUNE 30, 1998
Preferred Stock Common Stock Paid-in Accumulated
($.01 par) $.001 par) Capital Deficit Total
January 6, 1998 -
Formation of Titus 100000 $1000 4000000 $4000 $(5000) $ 0 $ 0
Stock issued pursuant
To Exchange Agreement 0 0 61983 62 ( 62) 0 0
Stock issued for
Services 0 0 1400000 1400 138600 0 140000
Net loss 0 0 0 0 0 (135923) (135923)
Balance, June 30,1998 100000 $1000 5461983 $5462 $133538 $(135923) $ 4077
F-5
UNITED NATIONAL FILM CORPORATION
AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 6, 1998 (INCEPTION) TO JUNE 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (135,923)
Adjustments to reconcile net loss to net cash
Provided by operating activities:
Non-cash imputed compensation expense 140,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable 318
Total adjustments 140,318
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITES 4,395
NET INCREASE (DECREASE) IN CASH 4,395
CASH AT BEGINNING OF PERIOD 0
CASH AT END OF PERIOD $ 4,395
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
During the period ended June 30, 1998, the Company issued 1,400,000
shares of common stock with a total value of $140,000 in exchange for
consulting fees.
See notes to consolidated financial statements
F-6
UNITED NATIONAL FILM CORP. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS DESCRIPTION
United National Film Corp. and Subsidiary ("the 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. 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 deferred and amortized by the "individual-film
- -forecast-computation method" as required by Statement of Financial Standards
No. 53.
F-7
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. Cash Equivalents:
The Company considers all highly liquid temporary cash investments, with an
original maturity of three months or less when purchased, to be cash
equivalents.
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 advanced under such contracts, and 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.
3. RELATED PARTY TRANSACTIONS
During the period, the Company performed a $50,000 production contract for a
limited partnership whose general partner is an officer and director of the
Company.
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:
1. reverse split the common stock of the Company at the ratio of 1000:1;
2. issuance of 4,000,000 shares (post split) of the Company to the
shareholders of Titus;
3. issuance of 50,000 shares of non-voting convertible preferred stock
(convertible into common voting stock at the ratio of 20:1) to the
shareholders of Titus;
4. the acquisition of 1,000,000 shares of Titus (being all of the issued
and outstanding shares of Titus);
5. 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.
F-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 designated the 100,000 shares of issued
preferred stock, par value $.01, and "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.
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.
F-9
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no disagreements between the Registrant and its independent
accountants on any matter of accounting principles or practices or financial
statement disclosure.
PART III
Item 10 - Directors and Executive Officers
By acquiring Titus, the Company has obtained a team of seasoned executives in
the entertainment industry. The initial management team of Titus and the
Company is comprised of Mr. Deno Paoli as Chairman, President and Chief
Executive Officer who will be responsible for the operations of the Company.
Mr. Paoli will also be seeking acquisitions of other synergistic companies that
can add and implement value to the Company. Mr. Paoli will further serve as
the Chairman of the Executive Committee which will be responsible for daily
operational decisions. Mr. Paoli has over 27 years of experience in the film
industry as a producer and director and has held various senior executive
management positions. Most notably, Mr. Paoli served as producer on the film
Code Name Zebra by Pacific West Cinema; served as President of Vagabond
Productions, Inc. which produced such films as Santee, starring Glenn Ford;
served as producer and director with World Productions, Inc. in charge of such
films as The World Past, starring Phil Carey, and To Live, To Love, To Die with
Brad Stewart. Mr. Paoli served as the President of Variety International
Pictures, Inc, where he was responsible for all company businesses including
film production and distribution. Mr. Paoli continues to maintain his
contacts throughout Europe, the Middle East and the Far East, in particular,
Japan, Hong Kong and Taiwan.
Ms. Jody Mortara is the Vice President in charge of development and production.
In addition, Ms. Mortara is responsible for acquiring both new concepts which
can be developed into meaningful scripts for production and scripts which are
fully developed and ready for production. Ms. Mortara also serves as a member
of the Executive Committee. Ms. Jody Mortara has been in the entertainment
Industry for over 10 years as an actress and as a producer. Originally from the
San Francisco Bay Area, Ms. Mortara'a attended San Francisco State and UCLA
with an educational major in theater. Ms. Mortara now resides in the greater
Los Angeles area with her husband and family. Ms. Mortara has held such
positions as casting director with Sega of America, responsible for casting
duties on Sega's many interactive video games. She has worked with Hewlett
Packard's Dealership of the Future; ASCNET, Inc.'s 911, the Road Phone and
3DO's Indigo. As producer, Ms. Mortara served with Studio Three Productions
of Oakland, California; Intel Corp 's Inside Intel, a company commercial and
with White Rose Productions of Berkeley, California. As co-founder of Titus
Productions, Ms. Mortara was responsible for all day to day operations
including creative and developmental data.
The third member of the initial management team is Mr. Ted Mortarotti who will
act as Vice President and Chief Financial Officer. Mr. Mortarotti will be
responsible for all financial aspects and requirements of the company. Mr.
Mortarotti will coordinate closely with the company's accounting firm of Dambly
& Finch. In addition to the foregoing duties, Mr. Mortarotti will
be responsible for shareholders relations and corporate communications. Mr.
9
Mortarotti will also serve as a member of the Executive committee. Mr.
Mortarotti was raised and educated in both Wisconsin and the San Francisco Bay
Area. Mr. Mortarotti's professional background is in the financial area. Mr.
Mortarotti will be the Company's Chief Financial Officer.
Item 11 - Executive Compensation
During the fiscal reporting year applicable hereto, the Company has not paid
any salary to its officers. 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 2,000,000 36.6%
Ms. Jody Mortara 1,000,000 18.3%
Mr. Ted Mortarotti 1,000,000 18.3%
As a Group 4,000,000 73.2%
Item 13. Related Transactions, Changes in Securities.
On February 10, 1998, the Company entered into a Stock Purchase and Exchange
Agreement with Titus Productions, Inc. ("Titus") et al. which provided for the
recapitalization of the Company through the adoption of a resolution to:
a) reverse split the common stock of the Company at the ratio of 1000:1;
b) issue 2,000,000 shares (post split) of the Company to Mr. Deno Paoli and
issue 2,000,000 shares (post split) of the Company to Mr. Ted Mortarotti and
Ms. Jody Mortara in equal proportions;
c) issue 50,000 shares of non-voting convertible preferred stock
(convertible into common voting stock at the ratio of 20:1) to Mr. Deno Paoli
and issue 50,000 shares of non-voting convertible preferred stock
(convertible into common voting stock at the ratio of 20:1) to Mr. Ted
Mortarotti and Ms. Jody Mortara in equal proportions;
d) acquire 1,000,000 shares of Titus Productions, Inc. (being all of the
issued and outstanding shares of Titus);
e) acquire all of the common voting shares of the Company owned by Mr.
Conrad Sprenger and Mr. Richard L. Bare and cancel such shares at no cost to
the Company; and
f) issue and register 1,000,000 shares of common voting stock to Donald R.
Yu et alia pursuant to the provisions of a Consulting Agreement and in
accordance with the Securities and Exchange Act of 1933 on Form S-8.
Pursuant to the Agreement, the Company acquired all of the capital stock of
Titus and the common voting shares of Mr. Conrad Sprenger and Mr. Richard L.
Bare in exchange for the distribution of the shares to Mr. Deno Paoli and Ms.
Jody Mortara. After the exchange, Mr. Deno Paoli owned approximately
36.6% of the issued and outstanding shares of the Company. Mr. Ted Mortarotti
and Ms. Jody Mortara each owned approximately 18.3% of the issued and
outstanding shares of the Company.
Following the completion of all of the foregoing transactions, the number of
10
shares outstanding of the issuer's Common Stock was 5,461,983.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Exhibits
None
(b) Financial Statement Schedules
None
(c) Reports on Form 8-K.
The company filed a Current Report on Form 8-K dated February 10, 1998 to
Report the transactions set out in Item 2. The Company filed an amendment to
the 8-K dated February 10, 1998 on April 1, 1998. The amendment contained
financial information not available at the time of the filing of the 8-K
dated February 10, 1998.
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: October 8, 1998