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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996.
[ ] 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 0-13102
THE NOSTALGIA NETWORK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0923659
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
650 MASSACHUSETTS AVENUE NW WASHINGTON, DC 20001
(Address of Principal executive office) (Zip Code)
(202) 289-6633
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of the Registrant's Common Stock, $.04 par value as of the
close of the period covered by this Report was 20,274,371.
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TABLE OF CONTENTS
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of
June 30, 1996 and December 31, 1995 3
Statements of Operations
For the Three and Six Months Ended June 30, 1996 and 1995 4
Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders 12 - 13
Item 5. Other Information 13
Index to Exhibits 15
Exhibit 27 - Financial Data Schedule 16
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ITEM 1. FINANCIAL STATEMENTS
THE NOSTALGIA NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1996 December 31, 1995
-------------------- --------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $3,204,090 $855,739
Accounts receivable, less allowance of
$2,149,000 and $2,258,000, respectively 746,346 1,304,596
Prepaid legal fees 72,963 75,000
Prepaid expenses 131,078 106,265
Cablecast rights 7,200,000 6,800,000
-------------------- --------------------
Total current assets 11,354,477 9,141,600
Programming and cablecast rights - net 10,070,271 13,185,348
Property and equipment - net 1,572,305 1,612,562
Other assets 16,031 16,031
-------------------- --------------------
Total assets $23,013,084 $23,955,541
-------------------- --------------------
-------------------- --------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term obligations $6,818,410 $6,355,493
Accounts payable 1,600,686 1,406,840
Accrued expenses and other liabilities 862,870 834,306
-------------------- --------------------
Total current liabilities 9,281,966 8,596,639
-------------------- --------------------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES
Notes and interest payable - related parties 17,814,420 10,925,346
Accrued interest payable and other 61,000 54,747
Cablecast licenses and fees payable 8,765,665 11,901,542
-------------------- --------------------
Total long-term liabilities 26,641,085 22,881,635
-------------------- --------------------
Total liabilities 35,923,051 31,478,274
-------------------- --------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: $2 par value, 125,000 shares
authorized, 3,250 issued and outstanding 6,500 6,500
Common stock: $0.04 par value, 30,000,000 shares
authorized, 20,274,371 and 20,274,371 shares
issued and outstanding, respectively 810,975 810,975
Additional paid-in capital 30,213,554 30,213,554
Deficit (43,940,996) (38,553,762)
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Total stockholders' equity (deficit) (12,909,967) (7,522,733)
-------------------- --------------------
Total liabilities and stockholders'
equity (deficit) $23,013,084 $23,955,541
-------------------- --------------------
-------------------- --------------------
</TABLE>
See accompanying notes to the financial statements.
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THE NOSTALGIA NETWORK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six months
Ended June 30, Ended June 30,
---------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Affiliate revenue $995,171 $1,105,854 $2,095,234 $2,225,347
Advertising sales revenue 1,402,456 1,523,780 3,102,748 3,107,014
Other (5,363) 348,390 - 594,516
----------- ----------- ----------- -----------
Total operating revenues 2,392,264 2,978,024 5,197,982 5,926,877
----------- ----------- ----------- -----------
OPERATING EXPENSES
Programming, production and transmission 1,498,357 926,722 2,894,500 2,052,004
Programming amortization 1,769,389 1,591,450 3,417,577 3,175,237
Sales and marketing 1,168,823 1,297,201 2,298,708 2,390,808
Finance, general and administration 924,426 1,218,352 1,689,826 2,263,820
Relocation, litigation settlement and other - - (150,000) -
----------- ----------- ----------- -----------
Total operating expenses 5,360,995 5,033,725 10,150,611 9,881,869
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (2,968,731) (2,055,701) (4,952,629) (3,954,992)
----------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSE)
Interest income (expense) - net (252,610) (108,910) (434,607) (189,255)
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR
FEDERAL INCOME TAXES (3,221,341) (2,164,611) (5,387,236) (4,144,247)
PROVISION FOR FEDERAL INCOME TAXES - - - -
----------- ----------- ----------- -----------
NET LOSS $(3,221,341) $(2,164,611) $(5,387,236) $(4,144,247)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET LOSS PER COMMON SHARE $(0.16) $(0.11) ($0.27) ($0.20)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 20,274,371 20,274,371 20,274,371 20,245,260
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements.
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THE NOSTALGIA NETWORK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------------
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(5,387,236) $(4,144,247)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,548,078 3,207,737
Provision for losses on accounts receivable (54,000) 552,000
Net change in operating assets and liabilities:
(Increase) decrease in accounts receivable 504,250 (190,020)
(Increase) in prepaid expenses & other assets (22,776) (98,004)
Increase (decrease) in accounts payable 193,846 (69,055)
Increase in accrued expenses
and other liabilities 425,393 20,661
------------- ------------
Net cash used in operating activities (792,445) (720,928)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of programming and cablecast rights (298,000) (2,170,719)
Purchases of property and other assets (90,244) (27,671)
------------- ------------
Net cash used in investing activities (388,244) (2,198,390)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term obligations (2,970,960) (2,981,177)
Proceeds from bridge financing 6,500,000 4,000,000
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Net cash provided by financing activities 3,529,040 1,018,823
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,348,351 (1,900,495)
CASH AND CASH EQUIVALENTS - BEGINNING 855,739 2,782,683
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CASH AND CASH EQUIVALENTS - ENDING $3,204,090 $882,188
------------- ------------
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NONCASH INVESTING AND FINANCING ACTIVITIES:
Vendor financing of programming rights $404,500 $-
------------- ------------
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</TABLE>
See accompanying notes to the financial statements.
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The Nostalgia Network, Inc.
NOTES TO FINANCIAL STATEMENTS
1. The financial information included herein is submitted pursuant to the
requirements of Form 10-Q and does not include all disclosures required by
generally accepted accounting principles. It is suggested that these
unaudited financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1995 filed with the
Securities and Exchange Commission, which are incorporated herein by
reference. The accompanying interim financial statements reflect all
adjustments (consisting of normal recurring accruals only) which are, in
the opinion of management, necessary for a fair statement of the results
for the interim periods presented. The results of operations for interim
periods are not necessarily indicative of the results to be obtained for
the entire year.
2. Certain reclassifications have been made to the financial statements for
the comparative period of the prior fiscal year for consistency with the
presentation for the current period.
3. Cash Flow - Cash equivalents include highly liquid debt instruments with a
maturity of three months or less.
4. During the six months ended June 30, 1996, the Company executed promissory
notes in favor of Concept Communications, Inc. ("Concept") totaling
$6,500,000, bearing interest ranging from 4.89% to 5.31%. The proceeds of
these notes are to provide bridge financing for working capital purposes
until such time as Concept and the Company can agree upon a price at which
the Company will sell its securities to Concept. These notes are covered
by the terms of a certain Security Agreement between Concept and the
Company dated January 4, 1996, as amended. Concept has stated it does
not intend to call its outstanding notes prior to February 1, 1997 unless
replaced by an equity investment.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. For a discussion of the
risks that may have an impact on the Company's results, see the Company's report
on Form 10-K for the year ended December 31, 1995.
RESULTS OF OPERATIONS
Total revenues decreased $728,895 or 12.3% (from $5,926,877 to $5,197,982) for
the six months ended June 30, 1996 (the "Period") and $585,760, or 19.7% for the
three months ended June 30, 1996 (the "Quarter"). The decline resulted
principally from decreases in other revenues of $594,516 (from $594,516 to $0)
for the Period and 353,753 (from $348,390 to $(5,363)) for the Quarter; and
affiliate revenue decreases of $130,113, or 5.85% (from $2,225,347 to
$2,095,234) for the Period and $110,683, or 10% (from $1,105,854 to $995,171)
for the Quarter.
Other revenues decreased due to the December 1995 termination of the Company's
contract for interactive home shopping services. During 1995 the Company had
allotted approximately 30 hours a week to interactive home shopping.
Contractual problems with RSTV Inc., which provided the service under the name
Via TV! ("Via"), coupled with Via's poor product mix and services, caused the
Company to not renew the contract. The air time allotted home shopping during
1995 has temporarily reverted to infomercials. During the third quarter of
1996 the Company has commenced testing alternative programming models for a
portion of that time period, including potential new providers of interactive
home shopping.
Advertising revenue remained relatively flat for the Period but decreased by
$121,324, or 8% (from $1,523,780 to $1,402,456) for the Quarter. Infomercial
sales remained relatively flat for the Period but decreased $170,512, or 15%
(from $1,110,883 to $940,371) for the Quarter. Total hours devoted to
infomercials has increased significantly compared to the same period in 1995;
however, the composition consists of a higher volume of lower priced overnight
hours. During third quarter 1995 the Company completed its efforts to
eliminate infomercials during its mid-day programming and no longer airs
infomercials during the period from 10 am to 3 am, Monday through Friday.
Although these mid-day hours command the highest price, they were viewed as a
significant detriment to the network's programming by cable system operators.
In January, 1996 the failure of Via TV resulted in the Network's overnight
shopping hours being converted to infomercials. Although this resulted is a
significant increase in hours devoted to infomercials, the average rate was
significantly lower than the other infomercial hours. The net effect of
these changes was a 47% reduction in average hourly rate. Additionally, the
network is experiencing a period of instability in infomercial advertisers as
they change products and renegotiate pricing, resulting in lower overall
pricing. Management has received indications that the infomercial industry is
softening and, accordingly, rate reductions might continue into the third
quarter. Management's plan is to identify alternative programming models for
its
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overnight block to replace the hours reverted to infomercials. Management
currently has no intentions to air infomercials during the hours from 10 am to 3
am, Monday through Friday.
Revenues from conventional advertising remained relatively flat for the Period
but increased by $49,188, or 11.9% (from $462,085 to $412,897) for the Quarter.
This increase is due principally to poor results in the second quarter of 1995
as a result of a high mix of lower priced per inquiry advertising in that
quarter. The company changed strategies in the third quarter 1995 which
improved overall revenues for conventional advertising. The network does not
anticipate the trend to continue in the third quarter of 1996 as the impact of
airing make good spots for national advertisers as a result of audience
deficiencies which will reduce the number of revenue producing spots.
Increased competition continues to cause reductions in the Company's affiliate
revenues, which decreased by $130,311, or 5.8% (from $2,225,347 to $2,095,234)
for the Period and $110,683, or 10% (from $1,105,854 to $995,171) for the
Quarter. Competition from new programming services which have strong strategic
alliances has placed additional economic pressures on system operators to make
available already scarce channel capacity. Compounding these factors,
technological advances which were heralded to expand channel capacity have not
yet developed to commercially feasible standards within the time frame
originally anticipated, creating additional competition. Management
anticipates that this trend will continue as system operators renegotiate
contracts and as new system launches, which are provided a period of free
service, replace paying systems which have dropped the network. Lingering
perceptions of the Company's past programming and former management have
continued to make the Network vulnerable to being dropped due to channel
capacity issues.
The Network has responded by continuing to improve its programming content
through acquisitions and has commenced producing additional original
programming, such as AMERICA WITH DENNIS WHOLEY, which features a penetrating
look at the political, cultural and social issues of the day; HEALTH AND
WELLNESS, which uncovers the latest breakthroughs in medicine, nutrition and
physical fitness; and ISSUES & ANSWERS, a political panel discussion program
hosted by Ron Nessen. The Network continues to produce additional original
music programs, including "TOO MARVELOUS FOR WORDS, A SINGER/SONGWRITER SALUTE
TO JOHNNY MERCER" honoring the 1996 Mercer Foundation scholarship award winners
at the Smithsonian Institute in Washington DC. The Company has also continued
discussions with cable system operators and other potential providers of
distribution. The Company expects these measures will result in growth in the
number of affiliates, but remains uncertain as to the effect competition and
technology will ultimately have on average revenue per affiliate.
Total operating expenses increased $268,742, or 2.7% (from $9,881,869 to
$10,150,611) for the Period and $327,270, or 6.5% (from $5,033,725 to
$5,360,995) for the Quarter. The increase for the Period was primarily a
result of an increase of $842,496, or 41% in programming, production and
transmission costs and $242,340, or 7.6% in programming amortization costs.
Offsetting these increases were decreases in sales and marketing costs of
$92,100, or 3.8%; finance, general
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and administrative costs of $573,994, or 25.3% and proceeds from settlement of
litigation in the amount of $150,000 compared to none in the prior period. The
increase for the Quarter was primarily a result of an increase of $571,635, or
61.7% in programming, production and transmission costs and $177,939, or 11% in
programming amortization costs. Offsetting these increases was a decrease in
sales and marketing costs of $128,378, or 9.9% as well as a decrease in finance,
general and administrative costs of $293,926, or 24.1%.
Programming, production and transmission costs have increased by $842,496, or
41%, (from $2,052,004 to $2,894,500) for the Period and $571,635, or 61.7% (from
$926,635 to $1,498,357) for the Quarter. These increases are primarily as a
result of costs associated with production of new original programs such HEALTH
& WELLNESS, ISSUES & ANSWERS, and AMERICA WITH DENNIS WHOLEY, as well as
increased costs associated with improving the Network's on-air look.
Programming amortization costs have increased by $242,340, or 7.6% (from
$3,175,237 to $3,417,577) for the Period and $177,939, or 11.1% (from $1,591,450
to $1,769,389) for the Quarter as a result of the Company's commitment to
improved programming. The Company expects to incur additional increases in
future programming amortization and studio production costs as a consequence of
upgrading the Network's programming and creation of new original programs. These
additional future expenditures will adversely impact the Company's results of
operations in the short-term but are critical to the Company's long-term
survival and growth.
Sales and marketing expenses have decreased by $92,100, or 3.8% (from $2,390,808
to $2,298,708) for the Period and $128,378, or 9.9% (from $1,297,201 to
$1,168,823) for the Quarter. Premium purchases increased by $90,509, or
153.2% (from $59,072 to $149,581) for the Period and $5,458, or 27.7% (from
$19,665 to $25,123) for the Quarter primarily as a result of timing of bulk
purchases. National events increased to $49,557 for the Period and $22,399 for
the Quarter due to the Network's sponsoring of Life Stage Matrix Marketing
programs to assist affiliates in attracting persons in the 49 plus demographics
to become subscribers. Convention expenses decreased $60,937, or 29% (from
$210,074 to $149,137) for the Period and $35,511, or 19.6% (from $181,369 to
$145,858) for the Quarter due to timing of convention events and efficiencies
gained through last year's purchase of a new booth. Program guide costs
decreased $57,325, or 38.2% (from $150,206 to $92,881) for the Period and
$33,353, or 43.8% (from $76,090 to $42,737) for the Quarter due to production
revisions resulting in cost savings. Professional fees decreased $69,078, or
42.7% (from $161,681 to $92,603) for the Period and $11,813, or 23.3% (from
$50,582 to $38,769) primarily as a result of decreased consumer and advertising
sales research.
Finance, general and administrative costs decreased by $573,994, or 25.4% (from
$2,263,820 to $1,689,826) for the Period and $293,926, or 24.1% (from $1,218,352
to $924,426) for the Quarter. This decrease was primarily attributed to legal
and professional fees which decreased by $458,688, or 58.2% (from $787,556 to
$328,868) for the Period and $183,008, or 49.9% (from $366,931 to $183,923) for
the Quarter due to resolution of various legal matters which were outstanding in
the first half of 1995. Bad debt expense decreased by $265,998, or 46.9%
(from $565,998 to $300,000) for the Period and $269,496, or 64.2% (from $419,496
to
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$150,000) for the Quarter as a result of additional reserves required in the
prior year for the failure of Via TV. Salaries, wages and other employee
costs increased by $121,190, or 26.2% (from $461,323 to $582,513) for the Period
and $104,695, or 46.9% (from $223,430 to $328,125) for the Quarter primarily due
to costs associated with transitioning of the Company's president and other
staffing changes.
As a result of increased programming, production and traffic costs ($842,496);
decreased revenues ($728,895); increased programming amortization costs
($242,340); offset by decreased sales and marketing expenses ($92,100);
decreased finance general and administrative expenses ($573,994); and
litigation settlement awards of $150,000, the Company's loss from operations
increased $997,637, or 25.2% for the Period. As a result of increased
programming, production and traffic costs ($571,635); decreased revenues
($585,760); increased programming amortization costs ($177,939); offset by
decreased sales and marketing expenses ($128,378); and decreased finance general
and administrative expenses ($293,926); the Company's loss from operations
increased $913,030, or 44.4% for the Quarter.
Other expense increased $245,352, or 129.6% (from $189,255 to $434,607) for the
Period and $143,700, or 131.9% (from $108,910 to $252,610) for the Quarter,
primarily as a result of interest on bridge loans provided by Concept
Communications, Inc., ("Concept"), the Network's majority shareholder.
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LIQUIDITY AND CAPITAL RESOURCES
Cash increased from $855,739 at December 31, 1995 to $3,204,090 at June 30,
1996, principally due to $6,500,000 bridge financing received in the first half
1996, reduced by cash outlays to cover increased operating losses and repayments
of certain debts. Working capital increased from $544,961 at December 31, 1995
to $2,072,511 at June 30, 1996 principally as a result of increased cash from
long-term bridge financing, reductions of accounts payable and repayments of
certain debts. Cablecast rights have decreased by $2,715,077 (13.6%) since
year-end as a result of amortization of the Network's investment in its prime-
time line up, offset by programming acquisitions of $702,500. Total
liabilities increased primarily due to $6,500,000 in bridge financing reduced by
payments on liabilities related to programming.
Cash flows from operating activities decreased $71,517, or 9.9% from using
$720,928 to using $792,445, principally as a result of reductions in accounts
receivable offset by increases in accrued expenses and accounts payable.
Cash used in investing activities decreased $1,810,146, or 82.3% from $2,198,390
to $388,244, principally due to an increase in purchase of other assets of
$62,573, offset by a $1,872,719 decrease in purchases of programming and
cablecast rights. Purchases of programming rights has decreased this year as a
result of multi-year purchases made in the prior year as well as a result of
increased in house production of new original programming.
Cash flows from financing activities increased $2,510,217, or 246.4% due
principally to bridge financing increases of $2,500,000, or 62.5% (from
$4,000,000 to $6,500,000) offset by reduced repayment of long-term obligations
of $10,217, or 0.3% (from $2,981,177 to $2,970,960).
The Company has received a total of $16,500,000 in bridge financing from
December 1994 through June 30, 1996, with rates varying from 4.89% to 8.59% from
Concept. Concept has committed to provide up to an additional $4,500,000 in
debt financing during the balance of the calendar year. Management believes
that these funds will be sufficient to satisfy its operating needs for 1996.
In connection with the additional borrowings and Concept's agreement to extend
the due dates on the bridge financing to February 1, 1997, the Company has
entered into a security agreement covering substantially all the Company's
assets in favor of Concept. Concept has informed the Company that it desires
to convert this debt to equity if Nostalgia and Concept are able to reach a
mutual agreement as to the terms of such conversion, but there can be no
assurance such a conversion will be achieved.
The Company believes that, in order to survive in the highly competitive market
for cable television programming, the Company will need significant additional
investment over the next four to five years. Such additional investment is
necessary to improve programming and increase distribution which the Company
anticipates will ultimately increase advertising revenues and result in
substantial long term revenue increases. Management has considered
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various steps the Company might take to achieve profitability. It now
believes that the Company's best alternative would be to form an alliance with a
strategic partner, such as a cable company or a diversified media company. By
entering into an alliance, the Company would have greater bargaining power in
its dealings with cable system operators, programming providers and advertisers.
It might also gain better access to distribution.
The Company's Board of Directors has directed its Executive Committee to study
the question of whether the Company should enter into a strategic alliance, and
to make recommendations to the full Board regarding this proposal. The
Executive Committee is now actively engaged in this study.
Because of the unpredictable factors involved in the search for a strategic
alliance, and the dynamic changes taking place in the industry, there is
considerable uncertainty about what the Company's needs will be in future years.
There can be no assurance either that the Company will be able to locate
sufficient funding in excess of the funds committed for 1996, or that it will be
able to achieve a strategic alliance.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of Stockholders was held on June 5, 1996. The
nominees for Director elected at the meeting were as follows:
Votes Cast
Nominee For Against
Christopher A. Cates 18,032,940 112,765
Floyd Christofferson 18,032,940 112,765
David Crane 18,032,940 112,765
Diane M. Faure 18,032,940 112,765
Dong Moon Joo 18,032,940 112,765
Masahisa Kobayashi 18,032,940 112,765
William H. Lash, III 18,032,940 112,765
Ambassador Phillip Sanchez 18,032,940 112,765
Josette Shiner 18,032,940 112,765
Robert J. Wussler 18,032,940 112,765
The appointment of BDO Seidman as independent accountants for 1996 was ratified
with 16,869,498 votes for, 92,165 votes against, and 1,184,042 votes withheld
or abstained.
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The vote for adoption of the 1996 Stock Option Plan was ratified with 14,644,745
votes for, 147,815 votes against and 3,353,145 votes abstained or withheld. A
special vote to amend the 1996 Stock Option Plan to reduce the number of shares
of stock per director which are subject to annual "formula" grants from 25,000
shares to 3,000 shares was ratified with 14,291,735 votes for, 299,100 votes
against, and 3,554,870 votes withheld or abstained.
Item 5. Other Information
On June 5, 1996, the Network announced the signing of a long-term contract with
Tele-Communications, Inc. ("TCI") that makes Nostalgia Television potentially
available to all TCI customers. TCI, the nation's largest multiple system
operator, serves 12.9 million customers. Although not guaranteeing carriage,
this contract signals a vote of confidence from the cable community concerning
Nostalgia.
On May 13, 1996, the Company entered into an Employment Agreement with former
ABC programming veteran SQuire Rushnell to become the Company's President and
Chief Executive Officer. Mr. Rushnell's appointment was effective June 5,
1996, and retiring President and Chief Executive Officer Jack Heim worked with
Mr. Rushnell during a transition period which ended June 30, 1996. Mr.
Rushnell is best known for his 20 years as a top programming executive at the
ABC Television Network where he led Good Morning America to record setting
ratings and profits. He also held the positions of Vice President, ABC Late
Night Programming, ABC Children's Programming and Long Range Planning for the
ABC Entertainment Division.
The Employment Agreement is for three years commencing May 13, 1996, and
provides for an initial base salary of $200,000, annual Benchmark bonuses of
$50,000 plus additional profit incentive bonuses. In addition, the contract
calls for the grant of stock options covering 839,840 shares of the Company's
Common Stock at an exercise price of $0.35 per Share vesting 25% each nine
months commencing February 12, 1997.
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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.
Dated August 14, 1996
THE NOSTALGIA NETWORK, INC.
By: /s/ SQuire M. Rushnell
----------------------------------
SQuire M. Rushnell, President and
Chief Executive Officer
By: /s/ Martin A. Gallogly
----------------------------------
Martin A. Gallogly, Vice President,
Treasurer and Chief Financial Officer
14
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page No.
- ----------- ----------- --------
10.1 Employment agreement dated as of May 13, 1996
between SQuire Rushnell and the Registrant (filed
as Exhibit 10 (a) to the Registrant's report on
Form 8-K dated May 13, 1996 and incorporated herein
by reference thereto)
10.2 Stock Option Agreement dated as of May 13, 1996
between SQuire Rushnell and the Registrant (filed
as Exhibit 10 (b) to the Registrant's Report on
Form 8-K dated May 13, 1996 and incorporated herein
by reference thereto)
27 Financial Data Schedule as required by Item 601
(c) of Regulation S-K 16
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Form 10-Q
for the quarter ended June 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3204090
<SECURITIES> 0
<RECEIVABLES> 2895346
<ALLOWANCES> 2149000
<INVENTORY> 17270271
<CURRENT-ASSETS> 11354477
<PP&E> 2845050
<DEPRECIATION> 1272745
<TOTAL-ASSETS> 23013084
<CURRENT-LIABILITIES> 9281966
<BONDS> 17814420
0
6500
<COMMON> 810975
<OTHER-SE> (13,727,422)
<TOTAL-LIABILITY-AND-EQUITY> 23013084
<SALES> 0
<TOTAL-REVENUES> 5197982
<CGS> 0
<TOTAL-COSTS> 10150611
<OTHER-EXPENSES> 434607
<LOSS-PROVISION> 150000
<INTEREST-EXPENSE> 434607
<INCOME-PRETAX> (5387236)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5387236)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5387236)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
