SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[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 No. 0-21051
CAPITAL MEDIA GROUP LIMITED
----------------------------------------------------
(exact name of small business issuer in its charter)
NEVADA 87-0453100
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 JAMES STREET, LONDON W1M 5HY
------------------------- -----------------
(Address of principal executive offices) (Zip Code)
44-171-224-4141
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter periods 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 [ ]
Transitional Small Business Disclosure Format. YES [ ] NO [X]
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited financial statements for the quarter and six months covered by this
report are attached hereto as required by item 310(b) of Regulation S-B.
<PAGE>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED REPORT AND FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
8
JUNE 30, DECEMBER 31,
NOTE 1996 1995
---- -------- ------------
$ $
<S> <C> <C> <C>
ASSETS
Cash 4,331,836 7,537,137
Accounts receivable, net of allowances for
doubtful accounts of $5,350 (December 31,
1995 - $6,104) 4 2,046,867 530,515
Inventories 81,861 80,414
Amounts due from shareholders - 3,679
Prepaid expenses 226,463 290,299
---------- ----------
TOTAL CURRENT ASSETS 6,687,027 8,442,044
Investments - 34,805
Intangible assets, net of accumulated
amortisation of $123,489 (December 31, 1995
- $33,272) 889,447 871,747
Property, plant and equipment, net 3 3,471,692 1,278,683
---------- ----------
TOTAL ASSETS 11,048,166 10,627,279
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 2,033,930 120,004
Accrued expenses 407,908 1,711,050
Amounts due to minority shareholders 474,221 700,386
---------- ----------
TOTAL LIABILITIES 2,916,059 2,531,440
COMMITMENTS AND CONTINGENCIES 5,6 - -
MINORITY INTEREST IN SUBSIDIARIES 613,873 673,828
---------- ----------
3,529,932 3,205,268
---------- ----------
STOCKHOLDERS' EQUITY 8
Preferred stock - 5,000,000 shares authorised:
$0.001 par value: no shares issued and
outstanding - -
Common stock - 50,000,000 shares authorised:
$0.001 par value 12,663,328 (December 31, 1995
- 9,326,664) issued and outstanding 12,663 9,327
Additional paid in capital 17,117,651 10,309,314
Subscriptions receivable (5,000) (5,000)
Cumulative translation adjustment 173,412 (59,963)
Accumulated deficit (9,780,492) (2,831,667)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 7,518,234 7,422,011
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 11,048,166 10,627,279
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD
FROM
INCEPTION
3 MONTHS 6 MONTHS 3 MONTHS (FEBRUARY
ENDED ENDED ENDED 17, 1995) TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
NOTE 1996 1996 1995 1995
---- ---------- ---------- -------- --------
$ $ $ $
<S> <C> <C> <C> <C> <C>
Revenue 481,647 959,805 - -
Operating costs (4,676,058) (8,097,660) (59,029) (60,685)
---------- ---------- -------- --------
Operating loss (4,194,411) (7,137,855) (59,029) (60,685)
Other income 18,837 19,480 - -
Interest income net 107,205 127,796 - -
---------- ---------- -------- --------
Loss before taxation (4,068,369) (6,990,579) (59,029) (60,685)
Tax provision 2 (539) (580) - -
---------- ---------- -------- --------
Loss after taxation (4,068,908) (6,991,159) (59,029) (60,685)
Minority interest 37,219 42,334 - -
---------- ---------- -------- --------
Net loss (4,031,689) (6,948,825) (59,029) (60,685)
========== ========== ======== ========
Net loss per share ($0.32) ($0.58) ($59,029) ($60,685)
Weighted average
shares outstanding 12,663,328 12,054,730 1 1
========== ========== ======== ========
</TABLE>
Results for the period ended June 30, 1995 reflect certain costs of Capital
Media (UK) Limited prior to the commencement of operations.
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
ADDITIONAL CUMULATIVE
SIX MONTHS ENDED PAID-IN SUBSCRIPTION TRANSLATION ACCUMULATED
JUNE 30, 1996 COMMON STOCK CAPITAL RECEIVABLE ADJUSTMENT DEFICIT TOTAL
- ---------------- ----------------------- ---------- ------------ ----------- ----------- ----------
SHARES $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995 9,326,664 9,327 10,309,314 (5,000) (59,963) (2,831,667) 7,422,011
Issuance of common stock 3,336,664 3,336 6,968,337 - - - 6,971,673
Translation adjustment - - - - 233,375 - 233,375
Commission paid on shares
issued - - (160,000) - - - (160,000)
Net loss - - - - - (6,948,825) (6,948,825)
---------- ------ ---------- ------ ------- ---------- ---------
Balance at
June 30, 1996 12,663,328 12,663 17,117,651 (5,000) 173,412 (9,780,492) 7,518,234
========== ====== ========== ====== ======= ========== =========
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION ADDITIONAL CUMULATIVE
(FEBRUARY 17, 1995) PAID-IN SUBSCRIPTION TRANSLATION ACCUMULATED
TO JUNE 30, 1995 COMMON STOCK CAPITAL RECEIVABLE ADJUSTMENT DEFICIT TOTAL
- --------------------- ----------------------- ---------- ------------ ----------- ----------- ----------
SHARES $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
at inception 1 1 - (1) - - -
Translation adjustment - - - - 1,172 - 1,172
Net loss - - - - - (60,685) (60,685)
---------- ------ ---------- ------ ------- ---------- ---------
Balance at
June 30, 1995 1 1 - (1) 1,172 (60,685) (59,513)
========== ====== ========== ====== ======= ========== =========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM
INCEPTION
6 MONTHS (FEBRUARY
ENDED 17,1995) TO
JUNE 30, JUNE 30,
1996 1995
---------- -----------
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (6,948,825) (60,685)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortisation 498,047 284
Minority interest (59,955) -
Changes in assets and liabilities
Increase in inventories (1,447) -
Increase in accounts receivable (1,544,448) (7,848)
Decrease in prepaid expenses 63,770 -
Increase in accrued expenses and
accounts payable 1,096,621 -
Decrease in amounts due to minority
shareholders (288,196) -
---------- -------
NET CASH USED IN OPERATIONS (7,184,433) (68,249)
---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (2,676,821) (6,751)
Acquisition of intangible assets (118,805) -
Proceeds on the sale of investments 34,805 -
---------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,760,821) (6,751)
---------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 6,971,673 -
Commission paid on issuance of shares (160,000) -
Proceeds from loan from shareholder - 150,000
---------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,811,673 150,000
---------- -------
NET (DECREASE)/INCREASE IN CASH (3,133,581) 75,000
Effect of exchange rate movements on cash (71,720) 1,172
Cash at start of period 7,537,137 -
---------- -------
Cash at end of period 4,331,836 76,172
========== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY:
Cash payments for interest - -
Cash paid for taxes 580 -
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles in the United States of America.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Capital
Media Group Limited ("the Company") and its wholly owned subsidiaries
Capital Media (UK) Limited ("CM(UK)"), Blink TV Limited and Onyx
Television GmbH ("Onyx") together with its 51% owned subsidiary Tinerama
Investment AG ("Tinerama") after the elimination of all significant
intercompany balances and transactions.
The operating results of Tinerama have been included in the consolidated
financial statements from the date of acquisition.
INTERIM ADJUSTMENTS
The condensed consolidated financial statements as of, and for the
periods ended, June 30, 1996 and 1995 are unaudited. The interim
financial statements reflect all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented.
The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1995 Annual Report on Form 10-K. The results of
operations for the interim periods should not be considered indicative of
results expected for the full year.
BASIS OF PREPARATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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.
2. INCOME TAXES
The income tax provision consisted of the following:
6 MONTHS 3 MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1996
-------- --------
$ $
Current tax expense 580 539
Deferred tax expense - -
--- ---
580 539
=== ===
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. INCOME TAXES (CONTINUED)
Net operating loss carryforwards give rise to deferred tax assets as
follows:
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
$ $
Unutilised tax losses 2,445,000 717,000
Valuation allowances (2,445,000) (717,000)
---------- --------
Total deferred tax assets - -
========== ========
The valuation allowance relates to deferred tax assets established under
Statement of Financial Accounting Standard No. 109 and relate to the
unutilised tax losses. These unutilised tax losses, substantially all of
which do not expire, will be carried forward to future years for possible
utilisation. Because the Company has not yet achieved profitability, it
has not recognised the benefit for these unutilised tax losses in the
financial statements.
3. PROPERTY, PLANT AND EQUIPMENT
JUNE 30, DECEMBER 31,
Property, plant and equipment consists of: 1996 1995
-------- ------------
$ $
Buildings 191,550 191,550
Fixtures, fittings and equipment 3,923,818 1,322,979
--------- ---------
Total property, plant and equipment 4,115,368 1,514,529
Less accumulated depreciation (643,676) (235,846)
--------- ---------
3,471,692 1,278,683
========= =========
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4. ACCOUNTS RECEIVABLE
JUNE 30, DECEMBER 31,
Accounts receivable comprise: 1996 1995
-------- ------------
$ $
Trade receivables 142,337 58,917
VAT receivables 1,209,435 113,722
Other debtors receivable within 1 year 70,467 65,134
Other debtors receivable after 1 year 624,628 292,742
--------- -------
Total 2,046,867 530,515
========= =======
VAT receivables arise substantially in Germany, and the Directors believe
they will be largely recovered in the quarter ended 30 September, 1996.
5. COMMITMENTS AND CONTINGENCIES
TRANSPONDER
A bank guarantee for ECU 2,000,000 ($2,495,400 at June 30, 1996 exchange
rates) was provided to PTT Telecom on November 30, 1995 in relation to an
agreement to lease transponder capacity in order to broadcast a
television channel in Germany. At that date the Company was not in a
position to support the guarantee and accordingly, in December 1995,
certain shareholders of the Company temporarily provided personal
guarantees pending the injection of further capital into the Company. The
Company is also committed to paying ECU 7,400,000 ($9,232,980 at June 30,
1996 exchange rates) over the next three years for use of the transponder
capacity under the terms of the agreement.
In accordance with its obligations, the Company will be replacing the
existing guarantee with alternative arrangements and will be required
to provide appropriate security for this purpose.
LEASE COMMITMENTS
On December 6, 1995 the Company entered into an agreement to lease
studio, post production and editing facilities in Germany. Under the
terms of the agreement the Company is committed to paying DM 991,000
($651,000 at June, 30, 1996 exchange rates) for the use of these
facilities until February 1997.
In January 1996 the Company entered into an agreement to lease uplink
capacity. Under the terms of the agreement the Company is committed to
paying (pound sterling)735,000 ($1,142,000 at June 30, 1996 exchange
rates) for the use of these facilities until January 1999.
The Company has also entered into leases for studio and office space in
Germany and the UK, expiring between 1997 and 2002 at an annualised
cost of $309,000 (at June 30 exchange rates).
6. LITIGATION
On May, 9 1996 Com TV Produktion und Vertrieb GmbH ("Com") and Nen TV
("Nen") in relation to their litigation with the Company served Further
and Better Particulars of the Defence and Counterclaim, which provide
details of matters alleged in the Defence and Counterclaim. The most
significant detail given is that Com and Nen have quantified their
estimated damages at DM3,325,438 ($2,252,400 at March 31, 1996 exchange
rates) based on a 5% share in profits over a five year period.
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company has filed a Reply and Defence to the Counterclaim and
believes that the Counterclaim is without merit and intends to vigorously
contest the same. There can be no assurance, however, as to the outcome
of this claim.
7. TINERAMA
Tinerama has an option to acquire up to 10% of the total issued shares of
each of its 51% owned Romanian subsidiary companies for a price of Lei
1,000,000 ($325 at June 30, 1996). The option is valid for a period of
six months from the date of finalisation of the 1995 financial statements
of the Romanian subsidiaries (June 7, 1996). TIAG has formally confirmed
its intention to exercise its option to acquire the full 10%.
8. WARRANTS
The Company has the following warrants (all of which expire 36 months
from the date of their effective registration) outstanding at June 30,
1996.
DESCRIPTION NUMBER
----------- ------
Warrants for common stock exercisable at $4.00 5,200,000
Warrants for common stock exercisable at $3.125 2,033,328
Warrants for common stock exercisable at $2.50 2,200,000
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FINANCIAL INFORMATION INCLUDED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. CERTAIN OF THE
DATA CONTAINED HEREIN INCLUDES FORWARD-LOOKING INFORMATION AND RESULTS COULD
DIFFER FROM THAT SET FORTH BELOW. THIS DISCUSSION SHOULD BE READ IN CONJUNCTION
WITH THE INFORMATION CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
1995 (THE "FORM 10-K") AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1996 (THE "FORM 10-Q").
RESULTS OF OPERATIONS
ONYX TELEVISION
Onyx began transmission on January 6, 1996. The primary expenses incurred in
operating a television station are programming costs, broadcast studio expenses,
transmission expenses, employee salaries and general and administrative
expenses. During the first half of 1996, Onyx has operated within management's
initial projections of operating costs.
However, advertising sales during the first half of 1996 have continued to be
slower than initially forecast. Total revenue from advertising sales and
commission on direct response television advertising has been substantially less
than anticipated. This reflects the fact that Onyx has taken longer than
projected to establish itself in the advertising market, in part, because of
delays in obtaining more extensive distribution of its channel on various German
cable networks.
Onyx has recently been informed that it will obtain increased distribution in
Nord Rhein Westphalia. This will bring Onyx's total distribution to
approximately five million cable and satellite households. Management forecasts
that distribution will exceed 7.0 million cable and satellite homes by the end
of 1996.
Management believes that distribution is key to achieving success in the
advertising sales market. The Company believes that five million households
represents a `critical mass' of homes which can be marketed to advertisers. The
Company also believes that Onyx's broadcast product has been well received
within the broadcasting industry, and amongst advertisers and consumers. This
response has been reinforced by the launch of additional show formats and an
increase in the use of interstitial presenters.
For these reasons, the Company believes that prospects for advertising sales
during the remainder of the year and in the next financial year are
significantly stronger. Notwithstanding this, the Company believes that Onyx's
operating losses in the first year of operation will be in the region of $12
million, exceeding initial estimates of $8 million. As a result, the Company's
funding requirements in respect of Onyx will be correspondingly increased from
that anticipated at the beginning of 1996 when the station was launched.
Management believes that operating losses in 1997 are likely to be in line with
initial expectations of $4 million. However, it is not certain that either
operating loss or funding requirement projections will be met. Moreover, such
estimates have not been reviewed or audited by an independent third party and
might be underestimated. See discussion on "Liquidity and Capital Resources"
below.
<PAGE>
Onyx Television has recently moved its principal operations from Studio Dortmund
to Television Communication Center, Dortmund. This move will substantially
enhance Onyx's production capabilities. In Dortmund, Onyx Television has entered
into several commitments in connection with production, editing and
post-production requirements and studio and office facilities. The annualised
cost of these commitments is approximately DM1,968,000 ($1,293,000). In
addition, Onyx leases facilities and equipment in Ingleheim, Germany at an
annualised cost of approximately DM1,500,000 ($1,060,000).
Further, for the transmission of the television channel via satellite, a
transponder has been secured at a cost of $2,800,000 for the first year. In the
case of the transponder, Capital Media (UK) Limited("CM (UK)") must provide a
guaranty of one year's lease payment for this obligation. At present, this
guaranty is provided by certain shareholders in the Company. See Note 5 to Notes
to Unaudited Consolidated Financial Statements.
In January 1996, the Company entered into an agreement to lease uplink capacity
until January 1999, at the cost of approximately $360,000 per
year. The Company has provided a guaranty of one year's lease payment for this
obligation.
The Company has entered into a heads of agreement with Viva Fernsehen GMBH & Co
KG ("VIVA") to create a strategic alliance between VIVA and Onyx in Germany. The
details of this arrangement are presently being finalized.
TINERAMA
CM (UK) holds a controlling interest in Tinerama Investments AG (TIAG), a
holding company holding a 51% interest in the Tinerama Companies, a group of
five media-related companies based in Bucharest, Romania. During the half year
ended 30 June 1996, each of the Tinerama Companies continued to operate at
either at a break-even level or experienced a small loss.
Towards the end of the half year, there has been a slow-down in the Romanian
market for print media which may adversely affect the profitability of
Tinerama's publishing interests during the remainder of this financial year. In
response to this economic situation, Tinerama intends to introduce new titles in
an effort to maintain profitability levels.
TIAG has an option to acquire up to 10% of the total issued shares of each of
its 51% owned Romanian subsidiary companies for a price of Lei 1,000,000 ($325 @
30 June 1996 exchange rates) from Dr. Max Banush. The option is valid for 6
months from the date of finalisation of the 1995 financial statements (June 7,
1996). TIAG has advised Dr. Banush that it intends to exercise its option to
acquire the full 10%. Upon exercise, TIAG will own 61% of the Tinerama
Companies.
BLINK TV
CM (UK) is also launching Blink TV. Blink TV will provide lifestyle programming
on large video screens at concert events. Blink is presently 100% owned by CM
(UK). At present, UM(UK) is negotiating with potential funding sources for Blink
TV. While there can be no assurance, the Company expects to obtain the funding
for Blink TV by selling a portion of the equity in Blink TV. If this funding
does not occur, the funding for the development of Blink TV will come from the
Company's internal resources. See discussion on "Liquidity and Capital
Resources" below.
Blink TV is currently planning the installation of video screens and projection
equipment at UK concert venues. At present, contracts have been signed with the
four targeted venues and it is anticipated that an agreement will be reached
with a fifth venue. Purchase orders have been issued for equipment and
installation with a value of approximately (pound sterling)270,000 ($420,000 at
30 June 1996 exchange rates).
<PAGE>
In addition to gaining access to the concert venues, Blink must secure the
agreement of concert promoters and organisers to provide programming at
individual events. At present, 20 dates have been confirmed out of a projected
85 (to the end of 1996). Management believe that they achieve the projected
number of broadcasts in 1996, although there are no guarantees that this will be
the case.
Blink TV obtains its revenues from the sale of advertising time during its
broadcasts. At present, the Company is projecting 1996 revenue from Blink TV of
(pound sterling)370,000 ($560,000 at 30 June 1996). Management believes that
they will achieve this projection, although there is no guarantee that this
will be the case.
HARMONY
On April 30, 1996, the Company announced that it had signed a non-binding letter
of intent together with Unimedia SA ("Unimedia") to jointly acquire Harmony
Holdings, Inc. ("Harmony") for a combination of cash and stock. Harmony is a Los
Angeles based television commercial and video production company. In July 1996,
Harmony terminated the letter of intent and announced that it would complete a
transaction with Unimedia, without the Company's involvement. The Company is
currently exploring its position with respect to this development.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently using its cash reserves more rapidly than had
previously been anticipated, due largely to the poorer than expected advertising
revenues at Onyx Television and higher than expected capital expenditures. At
present, management forecast that the Company will have to raise additional
funds during the third or fourth quarter of 1996 if it is to maintain the
Company's operations at their present level.
To address this, the Company is currently considering various options for
raising additional working capital resources and there have been a number of
discussions with a number of parties in this respect. The Company is confident
that funding with be forthcoming. However, there can be no guarantee that
additional working capital will be available on terms acceptable to the Company.
The failure to obtain the additional funding required will have a material
adverse impact on the Company's operations.
<PAGE>
PART 2
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in several lawsuits relating to the relationship between
CM (UK) and John Garman. The background to these lawsuits is provided in the
Form 10-K filing.
ENGLISH PROCEEDINGS BETWEEN CM (UK), COM TV PRODUCTION UND VERTRIEB GMBH ("COM
TV") AND NEN TV LIMITED ("NEN TV")
CM (UK) is engaged in dispute with COM TV and NEN TV in the High Court of
Justice, Queen's Bench Division in the United Kingdom, seeking a declaration
that the heads of agreement dated March 9, 1995 ("the Heads of Agreement") and
the letter of agreement dated March 31, 1995 (collectively, "the TV Agreements")
entered into by CM (UK), COM TV and John Garman, were discharged upon breach by
COM TV.
On November 24, 1995, COM TV and NEN TV filed a Defence and Counter claim in
response to CM (UK)'s Writ and Statement of Claim. In Defence and Counter claim,
COM TV and NEN TV denied that they are in breach of the TV Agreements. Further,
COM TV and NEN TV claim damages in an equal amount to the alleged loss of future
profits which would have been payable with respect to a 5% shareholding in Onyx
Television. COM TV and NEN TV further claim that CM (UK) has used confidential
information, documentation, records, research and data provided by COM TV and
NEN TV, and that they are entitled to an account of any profits realized by CM
(UK) for use of such items.
CM (UK) has filed a Reply and Defence to Counter claim and CM (UK) believes the
counter claim to be without merit and intends to vigorously contest the same.
There can be no assurance, however, as to the outcome of this claim.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the quarter covered by this report
ITEM 5. OTHER INFORMATION
The Company intends to complete its proposed redomestication from Nevada to
Bermuda in the near future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 19TH day of August, 1996.
CAPITAL MEDIA GROUP LIMITED
By:/S/ CHARLES KOPPEL
-----------------------------
Charles Koppel, President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,331,836
<SECURITIES> 0
<RECEIVABLES> 2,046,867<F1>
<ALLOWANCES> 0
<INVENTORY> 81,861
<CURRENT-ASSETS> 6,687,027
<PP&E> 3,471,692<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,048,166
<CURRENT-LIABILITIES> 2,916,059
<BONDS> 613,873<F3>
0
0
<COMMON> 12,663
<OTHER-SE> 7,505,571
<TOTAL-LIABILITY-AND-EQUITY> 11,048,166
<SALES> 959,805
<TOTAL-REVENUES> 959,805
<CGS> 0
<TOTAL-COSTS> 8,097,660
<OTHER-EXPENSES> 147,276<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,990,579
<INCOME-TAX> 580
<INCOME-CONTINUING> 6,991,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 42,334<F5>
<NET-INCOME> 6,948,825
<EPS-PRIMARY> .058
<EPS-DILUTED> .058
<FN>
<F1>Net of allowances for doubtful accounts of $5,350.
<F2>Net of depreciation.
<F3>Minority Interest in Subsidiaries.
<F4>Other Income.
<F5>Minority Interest.
</FN>
</TABLE>
