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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 September 30, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to ____________________
COMMISSION FILE NUMBER 0-13102
THE NOSTALGIA NETWORK, INC.
(Exact name of registrant as specified in its charter)
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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)
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(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 20,275,370.
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TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of
September 30, 2000 and December 31, 1999 3
Statements of Operations
For the Three and Nine Months Ended September 30, 2000 and 1999 4
Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 11
Item 3. Quantitative and Qualitative Disclosure about Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Default upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Report on Form 8-K 12
Exhibit 27 - Financial Data Schedule 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NOSTALGIA NETWORK, INC.
BALANCE SHEETS
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(Unaudited)
Sep. 30, 2000 Dec. 31, 1999
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,380,768 $674,177
Accounts receivable, less allowance of $75,000
and $161,000, respectively 553,305 826,588
Prepaid expenses 165,946 114,096
Programming and cablecast rights, net 4,561,566 7,105,280
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Total current assets 6,661,585 8,720,141
Programming and cablecast rights, net 2,894,191 2,981,416
Property and equipment, net 785,364 972,107
Deposits 76,431 49,430
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Total assets $10,417,571 $12,723,094
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of programming and cablecast fees $3,310,487 $4,810,822
Accounts payable --Trade 742,159 1,172,475
Accounts payable --Relatied parties 29,282 32,191
Accrued expenses and other liablilities 421,920 531,341
Unearned income 206,917 221,016
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Total current liabilities 4,710,765 6,767,845
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LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES
Programming and cablecast fees 173,909 2,135,164
Notes payable to related parties 97,335,900 86,085,900
Accrued interest payable -- Related parties 5,824,413 330,463
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Total long-term liabilities 103,334,222 88,551,527
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Total liabilities 108,044,987 95,319,372
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' 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, 20,275,370 and 20,275,370 shares
issued and outstanding in 2000 and 1999 811,015 811,015
Additional paid-in capital 30,213,584 30,213,584
Deficit (128,658,515) (113,627,377)
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Total stockholders' deficit (97,627,416) (82,596,278)
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Total liabilities and
stockholders' deficit $10,417,571 $12,723,094
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THE NOSTALGIA NETWORK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months For the Nine Months
Ended September 30, Ended September 30,
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2000 1999 2000 1999
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OPERATING REVENUES
Affiliate revenue $501,135 $518,272 $1,548,935 $1,681,827
Advertising sales revenue 710,827 720,754 2,752,368 2,267,090
------------- ------------ -------------- -----------
Total operating revenues 1,211,962 1,239,026 4,301,303 3,948,917
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OPERATING EXPENSES
Programming, production and transmission 1,310,778 1,091,814 3,726,491 3,643,449
Programming amortization 1,606,613 2,275,208 5,655,214 6,516,270
Sales and marketing 377,841 828,930 1,495,412 2,645,641
Finance, general and administration 742,720 758,967 2,535,565 2,623,069
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Total operating expenses 4,037,952 4,954,919 13,412,682 15,428,429
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LOSS FROM OPERATIONS (2,825,990) (3,715,893) (9,111,379) (11,479,512)
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OTHER INCOME AND (EXPENSE)
Interest and other - net (2,090,791) (1,496,752) (5,919,759) (4,380,023)
------------- ------------ -------------- -----------
NET LOSS $(4,916,781) $(5,212,645) $(15,031,138) $(15,859,535)
============= ============ ============== ===========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.24) $(0.26) $(0.74) $(0.78)
============= ============ ============== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 20,275,370 20,275,370 20,275,371 20,274,382
============= ============ ============== ===========
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THE NOSTALGIA NETWORK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(15,031,138) $(15,859,535)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 209,739 218,773
Programming amortization 5,655,213 6,516,270
Provision for losses on accounts receivable 309,040 288,731
Net change in operating assets and liabilities:
Increase in accounts receivable (35,757) (297,083)
Increase in prepaid expenses (51,850) (57,901)
Increase in deposits (27,001) 0
Decrease in accounts payable (430,316) (304,268)
(Decrease) increase in accrued expenses
and other liabilities (112,331) 567,778
Increase in accrued interest 5,493,951 2,944,548
(Decrease) increase in unearned income (14,099) 128,593
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Net cash used in operating activities (4,034,549) (5,854,094)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (22,996) (54,958)
Acquistions of programming and cablecast rights (3,024,274) (2,463,837)
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Net cash used in investing activities (3,047,270) (2,518,795)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term obligations (3,461,590) (3,552,450)
Proceeds from note payable - related parties 11,250,000 12,000,000
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Net cash provided by financing
activities 7,788,410 8,447,550
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NET INCREASE IN CASH AND CASH
EQUIVALENTS 706,591 74,661
CASH AND CASH EQUIVALENTS - BEGINNING 674,177 539,371
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CASH AND CASH EQUIVALENTS - ENDING $1,380,768 $614,032
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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. These unaudited
financial statements should be read in conjunction with the financial
statements and notes thereto included in the annual report on Form
10-K for the fiscal year ended December 31, 1999 of the Nostalgia
Network, Inc. (the "Company"), filed with the United States Securities
and Exchange Commission (the "Commission") on March 30, 2000, 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. On December 31, 1999, the Company issued two substitution and
replacement notes to Crown Communications Corporation ("Crown") and
Concept Communications, Inc. ("Concept" together with Crown, the
"Majority Stockholders") in the amount of $63,997,292 and $21,783,608,
respectively, at 8.5%, with the principal and unpaid interest due
January 1, 2001. These notes require minimum monthly interest payments
in the aggregate amount of $60,000 and replace previously issued notes
in the principal amounts of $61,071,503 and $20,598,036 plus $2,925,789
and $1,185,572 in accrued and unpaid interest, respectively. On
January 31, 2000, March 09, 2000 and March 21, 2000, the Company issued
three promissory notes to Crown in the principal amount of $1,250,000
each, bearing interest at 8.5%. On April 14, 2000 and on May 16, 2000
the Company issued two promissory notes to Crown in the principal
amount of $1,250,000 each, bearing interest at 9%. On June 13, 2000,
July 26, 2000, August 20, 2000, September 22, 2000 and on November 13,
2000, the Company issued five promissory notes to Crown in the amount
of $1,250,000 each, bearing interest at 9.5%. Each of these is due
January 1, 2001. These notes are secured by certain Security
Agreements between the Majority Stockholders and the Company, as
amended.
5. In October 1999, the Company announced that it had received and
accepted an offer from Crown to enter into a cash merger which, if
consummated, would result in the elimination of the Company's
publicly-held shares of common stock and constitute a going-private
transaction within the meaning of Section 13(e)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"). Crown and Concept, which is
majority-owned by Crown are the beneficial owners of, in the aggregate,
70.3% of the Company's issued and outstanding shares of common stock.
Upon receipt, Crown's offer was referred to and reviewed by a
committee of the Company's independent directors, which recommended
that the offer be accepted. The Company's Board of Directors voted to
accept Crown's offer and to authorize the negotiation of definitive
documentation for the merger. Consummation of the merger remains
contingent upon, among other things, the approval of the Company's
stockholders. Crown has indicated that it and its affiliates will
vote in favor of the merger.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This Form 10-Q contains certain "forward-looking
statements" which represent expectations or beliefs of the Company, including,
but not limited to, statements concerning the Company's operations, performance,
financial condition, plans, growth and strategies. Any statements contained in
this Form 10-Q that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "anticipate," "intend," "could,"
"estimate," or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
including, but not limited to, those relating to development of the Company's
network and dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates). Certain of these
risks and uncertainties are beyond the Company's control, and actual results may
differ materially depending on a variety of important factors, including those
described in this Form 10-Q.
For a discussion of the risks that may have an impact on the Company's
results, see the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the Commission on March 30, 2000.
Results of Operations
Total revenues increased $352,386, or 8.92% (from $3,948,917 to $4,301,303) for
the nine months ended September 30, 2000 (the "2000 Period") as compared with
the nine months ended September 30, 1999 (the "1999 Period") and decreased
$27,064, or 2.18% (from $1,239,026 to $1,211,962) for the three months ended
September 30, 2000 (the "2000 Quarter") as compared with the three months ended
September 30, 1999 (the "1999 Quarter"). The increase in revenues for the 2000
Period was primarily a result of selling available radio spot airtime of which a
portion was acquired in 1999.
Overall advertising revenues increased $485,278 or 21.41% (from $2,267,090 to
$2,752,368) for the 2000 Period and decreased $9,927, or 1.38% (from $720,754 to
$710,827) for the 2000 Quarter. Infomercial sales decreased $418,515, or 50.21%
(from $833,465 to $414,950) for the 2000 Period and decreased $6,005, or 4.27%
(from $140,732 to $134,727) for the 2000 Quarter. The decrease in Infomercial
revenue is due to the Company's decision to shift from selling Infomercial time
during the overnight block to selling Nested Programs, which combine all of the
available time during the overnights and allows the Company to sell it as a
block of time designated for Nested Programs. Revenue from Nested Programs,
which are included in conventional advertising increased $754,466, for the 2000
Period and $29,464 for the 2000 Quarter. Conventional advertising increased
$4,855 or .39% (from $1,233,396 to $1,238,251) for the 2000 Period and decreased
$161,621, or 43.26% (from $373,586 to $211,965) for the 2000 Quarter. Other
revenue increased by
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$144,472, or 110.06% (from $(131,270) to $13,202) for the 2000 Period and
increased by $128,235, or 102.54% (from $(125,063) to $3,172) for the 2000
Quarter.
Affiliate revenues decreased by $132,892, or 7.90% (from $1,681,827 to
$1,548,935) for the 2000 Period and decreased by $17,137, or 3.31% (from
$518,272 to $501,135) for the 2000 Quarter. This was primarily as a result of
renegotiated contracts of affiliate customers who had dropped the service. The
length of each affiliate contract varies, but generally ranges from three to
five years. Certain of Nostalgia's affiliate contracts have expired and carriage
currently is provided on a month-to-month basis. Many of these affiliates have
declined to enter into new contracts until their plans for channel expansion are
completed. As a result of intense competition among cable networks for this
reduced number of channels, Nostalgia's per subscriber fees from affiliates may
decline.
The Company believes that baby boomer and older adults are a valuable market,
which currently is not being served by any other network. Government
statistics show that this demographic is the fastest growing demographic
segment and will account for 30% of the population in 2000. As the
technological front continues to change, the Company believes its best
approach is to further brand and build consumer awareness of the Network. In
furtherance of this goal, the Company is actively pursuing development of new
original programming specifically targeted to boomers and over which will be
unique to the Network. The Company believes that investment in the Network's
programming and consumer awareness will provide a greater long-term benefit
than diverting funds for short-term launch opportunities.
Operating expenses decreased $2,015,747, or 13.07% (from $15,428,429 to
$13,412,682) for the 2000 Period and decreased $916,967, or 18.51% (from
$4,954,919 to $4,037,952) for the 2000 Quarter. The decrease for the 2000 Period
was primarily a result of a decrease in sales and marketing costs of $1,150,229,
or 43.48% (from $2,645,641 to $1,495,412), a decrease in programming
amortization costs of $861,056, or 13.21% (from $6,516,270 to $5,655,214), a
decrease in finance and administrative costs of $87,504, or 3.34%. These
decreases were offset by an increase in programming, production and transmission
costs of $83,042, or 2.28% (from $3,643,449 to $3,726,491). The decrease for the
2000 Quarter was primarily the result of a decrease in programming amortization
of $668,595, or 29.39% (from $2,275,208 to $1,606,613, a decrease in sales and
marketing costs of $451,089, or 54.42% (from $828,930 to $377,841), a decrease
in finance, general and administrative costs of $16,247, or 2.14% (from $758,967
to $742,720). These decreases were offset by an increase in production and
transmission costs of $218,964, or 20.06% (from $1,091,814 to $1,310,778).
Programming, production and transmission costs, net of $5,655,214 and $1,606,613
in programming amortization costs for the 2000 Period and the 2000 Quarter
increased by $83,042, or 2.28% (from $3,643,449 to $3,726,491) for the 2000
Period and increased by $218,964, or 20.06% (from $1,091,814 to $1,310,778) for
the 2000 Quarter. The increase is a result of increased programming costs of
$755,032, or 27.68% (from $2,727,720 to $3,482,752) for the 2000 Period, and an
increase of $442,479 or 44.39% (from $996,745 to $1,439,224) for the 2000
Quarter, an increase in transmission
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costs of $255,869, or 10.20% (from $2,507,717 to $2,763,586) for the 2000
Period, and an increase of $109,637, or 12.73% (from $861,555 to $971,192) for
the 2000 Quarter. These increases were offset by decreases in production and
traffic costs of $27,954, or 7.85% (from $356,093 to $328,139) for the 2000
Period, and a decrease of $829, or .77% (from $107,918 to $107,089) for the 2000
Quarter. Programming amortization costs decreased by $861,056 or 13.21% (from
$6,516,270 to $5,655,214) for the 2000 Period and decreased $668,595 or 29.39%
(from $2,275,208 to $1,606,613) for the 2000 Quarter primarily as a result of
changes in the Network's programming lineup and programming contracts. The
Company expects to incur additional increases in future programming and studio
production costs as a consequence of the Network's programming initiatives and
the creation of new original programs. These additional future expenditures will
adversely impact the Company's results of operations in the short-term; however,
management believes they are critical to the Company's long-term survival and
growth.
The Company continues its schedule of new and original productions in 2000,
including the following programs: GTV DanceSport, which spotlights a rapidly
growing trend in America, ballroom and performance dancing, which is slated to
become a recognized Olympic sport; American Couples, hosted by esteemed
television journalist Nancy Glass, which is an hour long show celebrating the
family values, love, commitment and partnership of famous couples; Heroes &
Sheroes, which profiles ordinary men and women who have performed heroic tasks
for the benefit of their fellow man; American Families hosted by Nancy Glass,
which is a unique series that juxtaposes members of contemporary families
against the classic TV families of The Adventures of Ozzie and Harriet and Make
Room for Daddy and references how today's parents and children deal with age-old
issues confronting Ozzie Nelson and Danny Thomas; Flea Market Movie, where
collectibles aficionado, Christopher Kent, appraises viewer's attic treasures
during movie breaks; The Cookbook Show which features the Network's Flea Market
Movie host, Christopher Kent, who also is an accomplished chef, preparing dishes
from famous cookbooks; More Money with the Dolans, starring Ken and Daria Dolan,
the "first family of finance," which provides an entertaining program on money
issues; The Bull and the Bear, which features stock market reports by a "Siskel
and Ebert" type pair of hosts, Llewellyn King and Linda Gasparello; The Real Me
Autobiographies, which are true stories of famous people told in their own
words; and American Soldier, which features interviews with World War II
veterans as wraparounds to the dramatic series, Combat!, Garrison's Gorillas and
12 O'clock High.
Sales and marketing expenses decreased by $1,150,229, or 43.48% (from $2,645,641
to $1,495,412) for the 2000 Period and decreased $451,089, or 54.42% (from
$828,930 to $377,841) for the 2000 Quarter primarily as a result of decreases in
salaries and wages of $207,210, or 22.19% (from $933,888 to $726,678) for the
2000 Period and decreased by $7,122, or 2.88% (from $247,619 to $240,497) for
the 2000 Quarter. Marketing allowance decreased by $423,839, or 116.37% (from
$364,228 to $(59,611) for the 2000 Period and decreased $284,679, or 190.63%
(from $149,336 to $(135,343) for the 2000 Quarter as a result of renegotiated
contracts of affiliate customers who had dropped the service. Professional fees
decreased by $275,838, or 65.45% (from $421,477 to $145,639) for the 2000 Period
and decreased by $95,581, or 72.07% (from $132,620 to $37,039) for
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the 2000 Quarter primarily as a result of reduced expenditures on the Network's
affinity and new media efforts, as well as bringing the Network's public
relations operations in house.
Finance, general and administrative costs decreased by $87,504, or 3.34% (from
$2,623,069 to $2,535,565) for the 2000 Period and decreased by $16,247, or 2.14%
(from $758,967 to $742,720) for the 2000 Quarter. This decrease was primarily as
a result of a decrease in consolidation and retention costs of $130,623, 36.33%
(from $359,518 to $228,895) for the 2000 Period and decreased by $13,070, or
13.99% (from $93,394 to $80,324) for the 2000 Quarter. This increase was offset
partially by an increase in legal and professional fees of $114,743, or 48.39%
(from $237,123 to $351,866) for the 2000 Period and decreased by $9,682, or
18.48% (from $52,397 to $42,715) for the 2000 Quarter.
As a result of increased revenues ($352,386); decreased programming amortization
costs ($861,056); decreased sales and marketing costs ($1,150,229); decreased
finance, general and administrative costs ($87,504); offset by increased
programming, production and transmission costs ($83,042), the Company's loss
from operations decreased $2,368,133, or 20.63% (from $11,479,512 to $9,111,379)
for the 2000 Period. As a result of decreased revenues ($27,064); increased
programming, production and transmission costs ($218,964); offset by decreases
in programming amortization ($668,595); decreased sales and marketing costs
($451,089); decreased finance, general and administrative costs ($16,247), the
Company's loss from operations decreased $889,903, or 23.95% (from $3,715,893 to
$2,825,990) for the 2000 Quarter.
Other income/expense increased $1,539,736 or 35.15% (from $4,380,023 to
$5,919,759) for the 2000 Period and increased $594,039, or 39.69% (from
$1,496,752 to $2,090,791) for the 2000 Quarter, primarily as a result of
interest on outstanding debt.
Liquidity and Capital Resources
Cash increased for the 2000 Period (from $674,177 to $1,380,768), principally
due to $11,250,000 in financing received during the 2000 Period, offset by cash
outlays to cover operating losses and repayments of certain debts. Working
capital decreased in the 2000 Period (from $1,952,296 to $1,950,820) principally
as a result of a decrease in programming and cablecast rights. Cablecast rights
have decreased by $2,630,939, or 26.08% in the 2000 Period as a result of
amortization of the Network's investment in its primetime line-up. Total
liabilities increased primarily due to $11,250,000 in additional financing.
Cash used in operating activities decreased $1,819,545, or 31.08% (from
($5,854,094) to $(4,034,549)), for the 2000 Period compared to the 1999 Period,
principally as a result of decreases in accounts payable, improved collections
on accounts receivable and reduced overall expenditures primarily in sales and
marketing as a result of reductions in staff due to consolidation.
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Cash used in investing activities increased $528,475, or 20.98% (from
($2,518,795) to ($3,047,270)) principally due to an increase in purchases of
programming and cablecast rights of $560,437, or 22.7% (from $2,463,837 to
$3,024,274).
Cash flows from financing activities decreased $659,140, or 7.8% (from
$8,447,550 to $7,788,410) due principally to decreases in financing of
$750,000, or 6.25% (from $12,000,000 to $11,250,000) and decreased repayment
of long-term obligations of $90,860, or 2.5% (from $3,552,450 to $3,461,590).
In light of the Company's recurring losses, management is actively monitoring
expenses and examining operating methods to increase efficiencies. These
measures may provide short-term improvement, but do not address the more
critical long-term growth needs for the Network. In order to grow, the Network
needs to increase its affiliate base which, in turn, will increase the
subscriber base and should allow the Network to increase its advertising rates
as well as Affiliate revenues. To provide for necessary future growth,
management continues its focus on aggressive affiliate marketing, including
consumer awareness advertising and events, prominent presence at major trade
shows and new trade advertising.
Since 1990, Crown and Concept have been the principal sources of the Company's
capital. Crown and Concept have invested $2,300,000 and provided $85,781,000 in
debt financing since 1994, including $15,000,000 loaned by Crown to the Company
in 1999. Additionally, between January 1, 2000 and November 13, 2000, Crown has
provided $12,500,000 in debt financing to the Company and has committed to
advance, as needed, an additional $2,500,000 in debt or equity financing during
the balance of the calendar year. The Company believes that these funds will be
sufficient to satisfy its operating needs for 2000. In connection with the
borrowings, the Company has entered into a security agreement pledging
substantially all the Company's assets as security for its indebtedness to Crown
and Concept.
In October 1999, the Company announced that it had received and accepted an
offer from Crown to enter into a cash merger which, if consummated, would
result in the elimination of the Company's publicly-held shares of common
stock and constitute a going-private transaction within the meaning of Section
13(e)(3) of the Exchange Act. Crown and Concept, which is majority-owned by
Crown, in the aggregate are the beneficial owners of 70.3% of the Company's
issued and outstanding shares of common stock.
Upon receipt, Crown's offer was referred to and reviewed by a committee of the
Company's independent directors, which recommended that the offer be accepted.
The Company's Board of Directors voted to accept Crown's offer and to
authorize the negotiation of definitive documentation for the merger.
Consummation of the merger remains contingent upon, among other things, the
approval of the Company's stockholders. Crown has indicated that it and its
affiliates will vote in favor of the merger.
In January 2000, Crown and Concept transferred their respective shares of the
Company's
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common stock and preferred stock to NNI Acquisition Corporation, a Delaware
corporation ("Acquisition"), which was formed to facilitate the merger. Crown
and Concept retain beneficial control of the transferred shares, as
Acquisition is wholly owned by Crown and Concept.
It is anticipated that following the merger, the business and operations of
the Company will be continued substantially as currently conducted for the
immediate future, including continuing the Company's analysis of and efforts
to seek a strategic alliance. The Company has had contact with several
possible strategic partners, but no serious discussions have occurred. There
can be no assurance that the Company will be able to obtain a strategic
partner, or that any strategic partner will be willing to invest the sums
required by the Company in order to continue to grow the Network's subscriber
base. Crown and Concept have informed the Company that they intend to
reevaluate the business and operations of the Company following the merger and
take such actions with respect to the future business and operations of the
Company as they deem appropriate. Although there are no definitive plans or
agreements in place, Crown and Concept may cause the Company to enter into
joint venture or other agreements with other business entities after the
merger.
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 the Company's future needs. There can be no
assurance that the Company will be able to locate sufficient financing in
excess of that committed from Crown, nor that it will be able to achieve a
strategic alliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. None.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 5. OTHER INFORMATION. None
<PAGE> 14
ITEM 6. EXHIBIT AND REPORT ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
------------ -----------
<S> <C>
27 Financial Data Schedule as required by
Item 601(c) of Regulation S-K
</TABLE>
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 November 09, 2000
THE NOSTALGIA NETWORK, INC.
By: /s/ SQuire D. Rushnell
----------------------------------------
SQuire D. Rushnell, President and
Chief Executive Officer
By: /s/ Diane Fuller
----------------------------------------
Diane C. Fuller, Chief Financial Officer
and Treasurer
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<S> <C> <C>
27 Financial Data Schedule as required 17
by Item 601 (c) of Regulation S-K
</TABLE>
