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 SEPTEMBER 30, 1997
[ ]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 Identification
incorporation or organization) No.)
25 James Street, London W1M 5HY
- ------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
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__
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 34,544,484 SHARES OF COMMON STOCK.
Transitional Small Business Disclosure Format. YES ____ NO X
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited financial statements for the quarter covered by this report are
attached hereto in accordance with item 310(b) of Regulation S-B.
INDEX TO FINANCIAL STATEMENTS
Unaudited consolidated balance sheet at September 30, 1997
and December 31, 1996................................................3
Unaudited consolidated statement of operations for the three
and nine months ended September 30, 1997 and 1996....................4
Unaudited consolidated statement of stockholders' equity for
the nine months ended September 30, 1997.............................5
Unaudited consolidated statement of cash flows for the nine
months ended September 30, 1997 and 1996.............................6
Notes to the unaudited consolidated financial statements..................7
2
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<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEET
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
NOTE SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ------------ -----------
$ $
<S> <C> <C> <C>
ASSETS
Cash 453,541 320,070
Accounts receivable, net of allowances for doubtful
accounts of $11,470 (December 31, 1996 - $10,399) 6 2,871,676 754,103
Amount due from shareholders 13 -
Inventories 374,546 38,455
Prepaid expenses and deposits 564,331 1,481,836
--------------- --------------
TOTAL CURRENT ASSETS 4,264,094 2,594,464
Investments 3,030,113 217,213
Intangible assets, net of accumulated amortization of
$494,826 (December 31, 1996 - $262,536) 5 2,527,775 803,821
Property, plant and equipment, net 4 1,336,201 1,475,284
--------------- --------------
TOTAL ASSETS 11,158,183 5,090,782
=============== ==============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable 2,493,973 1,378,801
Accrued expenses 1,905,015 2,310,261
Loans repayable within one year 13 3,509,408 2,016,568
Amounts due to minority shareholders 559,965 411,600
--------------- --------------
TOTAL LIABILITIES 8,468,361 6,117,230
COMMITMENTS AND CONTINGENCIES 7,8 - -
MINORITY INTEREST IN SUBSIDIARIES 1,110,895 615,795
--------------- --------------
9,579,256 6,733,025
--------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock - 5,000,000 shares authorized:
$0.001 par value: no shares issued and outstanding - -
Common stock - 50,000,000 shares authorized:
$0.001 par value 39,100,804 (December 31, 1996 -
12,663,328) issued and outstanding 13 39,098 12,663
Additional paid in capital 30,745,158 17,117,651
Subscriptions receivable (5,000) (5,000)
Cumulative translation adjustment 2,468,011 326,214
Accumulated deficit (31,668,340) (19,093,771)
--------------- --------------
TOTAL STOCKHOLDERS' EQUITY 1,578,927 (1,642,243)
--------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 11,158,183 5,090,782
=============== ==============
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
3 MONTHS 9 MONTHS 3 MONTHS 9 MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
NOTE 1997 1997 1996 1996
---- -------------- -------------- -------------- --------------
$ $ $ $
<S> <C> <C> <C> <C> <C>
Revenue 673,678 1,548,410 491,521 1,451,326
Operating costs
Staff costs 809,601 2,558,753 1,034,720 2,655,118
Depreciation and amortization 158,222 407,587 309,073 763,016
Operating expenses 3,086,835 10,870,574 3,417,868 9,441,187
--------------- --------------- --------------- ---------------
(4,054,658) (13,836,914) (4,761,661) (12,859,321)
--------------- --------------- --------------- ---------------
Operating loss (3,380,980) (12,288,504) (4,270,140) (11,407,995)
Equity in net losses of investment in
joint venture (6,597) (144,111)
Interest (paid)/income net (12,950) (75,156) 34,705 162,501
Minority interest (129,180) (61,563) (1,006) 41,328
Other income 7,397 (3,568) (5,327) 14,153
--------------- --------------- --------------- ---------------
Loss before taxation (3,522,310) (12,572,902) (4,241,768) (11,190,013)
Tax provision 1,003 (1,666) 119 (461)
--------------- --------------- --------------- ---------------
Net loss (3,521,307) (12,574,568) (4,241,649) (11,190,474)
--------------- --------------- --------------- ---------------
Net loss per share ($0.10) ($0.44) ($0.32) ($0.91)
Weighted average shares outstanding 35,587,504 28,566,942 12,663,328 12,257,596
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
ADDITIONAL CUMULATIVE
COMMON PAID-IN SUBSCRIPTION TRANSLATION ACCUMULATED
STOCK CAPITAL RECEIVABLE ADJUSTMENT DEFICIT TOTAL
SHARES $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 12,663,328 12,663 17,117,651 (5,000) 326,214 (19,093,771) (1,642,243)
Issuance of common stock 26,437,476 26,435 13,627,507 - - - 13,653,942
Translation adjustment - - - - 2,141,797 - 2,141,797
Net loss - - - - - (12,574,569) (12,574,569)
------------ ---------- ----------- ----------- ----------- ------------ ----------------
Balance at September 30, 1997 39,100,804 39,098 30,745,158 (5,000) 2,468,011 (31,668,340) 1,578,927
============ ========== =========== =========== =========== ============ ================
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MEDIA GROUP LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
9 MONTHS ENDED 9 MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (12,574,568) (11,190,474)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 407,587 753,945
Equity in net losses of investment in joint
venture 144,111 -
Minority interest 495,100 (44,163)
Changes in assets and liabilities:
Decrease (Increase) in inventories (336,091) 5,881
(Increase) in accounts receivable (2,196,271) (798,123)
Decrease (increase) in prepaid expenses 1,030,294 (35,529)
Increase in accrued expenses and
accounts payable 2,643,335 988,409
Increase (decrease) in amounts due to minority
shareholders 148,365 (240,627)
---------------- -----------------
NET CASH USED IN OPERATIONS (10,238,139) (10,560,681)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (205,064) (2,995,390)
Acquisition of intangible assets (1,911,963) (128,888)
Acquisition of investments (2,843,961) 34,805
Investment in joint venture (113,050) -
---------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (5,074,038) (3,089,473)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 13,893,942 6,971,673
Commission paid on issuance of shares (240,000) (160,000)
Loans taken out in the year -
---------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,653,942 6,811,673
---------------- -----------------
NET INCREASE / (DECREASE) IN CASH (1,658,235) (6,838,481)
Effect of exchange rate movements on cash 1,791,706 (42,706)
Cash at start of period 320,070 7,537,137
---------------- -----------------
CASH AT END OF PERIOD 453,541 655,950
================ =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY:
Cash payments for interest 33,975 -
Cash paid for taxes 266 580
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
6
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
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)"), 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 company's investment in Blink TV Limited
("Blink"), a joint venture in which the company holds a 50% interest,
has been accounted for using the equity method.
On July 31, 1997, the Company acquired 50.3% of Unimedia's outstanding
common stock in exchange for 4,333,000 shares of the Company's
authorized but unissued common stock. On September 5, 1997, the Company
acquired a further 31.3% of Unimedia's outstanding common stock in
exchange for 2,693,600 shares of the Company's authorized common stock.
The acquisition was accounted for by the purchase method of accounting
and consolidated from the date on which the acquisition was completed.
INTERIM ADJUSTMENTS
The consolidated financial statements as, and for the periods ended,
September 30, 1997 and September 30, 1996, 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 consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
included in the Company's 1996 Annual Report on Form 10- KSB. 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.
INVENTORIES
Inventories are stated at the lower of first-in, first-out cost and
market value.
INTANGIBLE ASSETS
Intangible assets represent purchased broadcast licences, computer
software and goodwill arising on acquisition of subsidiary
undertakings. The amounts in the balance sheet are stated net of the
related accumulated depreciation. Goodwill is amortized over ten years.
Broadcast licences and computer software are amortized over their
useful lives.
7
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are all stated at cost. Depreciation is
recorded on a straight-line basis over the estimated useful lives of
the assets as shown below:
Buildings 25 to 50 years
Fixtures, fittings and equipment 5 to 20 years
FOREIGN CURRENCY
Assets and liabilities of the Company's foreign subsidiaries in the
United Kingdom and Germany are translated at year end exchange rates
and the results of those subsidiaries at the average exchange rate for
the year. The effects of these translation adjustments are reported in
a separate component of shareholders' equity. Exchange gains and losses
arising from transactions denominated in a currency other than the
functional currency of the entity involved are included in net income.
Assets and liabilities of the Company's foreign subsidiary in Romania
are translated at historical exchange rates in accordance with the
temporal method. This is due to the hyper-inflationary situation in
Romania.
INCOME TAXES
Full provision is made for all deferred tax liabilities. Deferred
income tax assets are recognized for deductible temporary differences
and net operating losses, reduced by a valuation allowance if it is
more likely than not that some portion of the benefit will not be
recognized.
LEASES
Operating leases are charged to the statement of operations in equal
annual amounts over the term of the lease.
2. GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the audited financial statements contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996, during the
year ended December 31, 1996 and the period from February 17, 1995 to
December 31, 1995, the Company incurred net losses of $16,262,104 and
$2,831,667, respectively. Additionally, the Company's net loss for the
first nine months of 1997 was $12,574,568, which includes a non-cash
accounting exchange rate translation loss of $2,500,356 arising from
changes in currency exchange rates since December 31, 1996. Further, at
December 31, 1996 the Company had net current liabilities of $3,522,766
and its total liabilities exceeded its total assets by $1,026,448.
These factors among others may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time. See the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1996, the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997 and the Company's Current Reports on Form 8-K
dated June 25, 1997 and July 11, 1997.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. As
described in note 13, the Company's continuation as a going concern is
dependent upon its ability to obtain additional financing or
refinancing as may be required, and ultimately to attain successful
operations. Management is continuing its efforts to obtain additional
funds so that the Company can meet its obligations and sustain
operations from sources that are described in note 13 to the financial
statements.
8
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
3. INCOME TAXES
The income tax provision consisted of the following:
9 MONTHS 9 MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
$ $
Current tax expense (1,666) (461)
============ ==========
Net operating loss carry forwards which give rise to deferred tax assets are as
follows:
SEPTEMBER 30, DECEMBER 31,
1997 1996
$ $
Unutilized tax losses 3,140,000 4,757,000
Valuation allowances (3,140,000) (4,757,000)
----------- ------------
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 unutilized
tax losses. These unutilized tax losses, substantially all of which do not
expire, will be carried forward to future years for possible utilization. The
Company has recognized the benefit for part of these unutilized tax losses in
the financial statements in respect of a subsidiary company.
4. PROPERTY, PLANT AND EQUIPMENT
SEPTEMBER 30, DECEMBER 31,
Property, plant and equipment 1997 1996
consists of: $ $
Buildings 191,550 191,550
Fixtures, fittings and equipment 1,995,703 1,817,170
---------- --------------
Total property, plant and equipment 2,187,253 2,008,720
Less accumulated depreciation (851,052) (533,436)
---------- --------------
1,336,201 1,475,284
========== ==============
9
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
5. INTANGIBLE ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
$ $
Purchased broadcast licences 347,221 364,969
Computer software 166,099 113,371
Goodwill 2,509,281 588,017
---------- ------------
3,022,601 1,066,357
Less accumulated amortization (494,826) (262,536)
---------- ------------
2,527,775 803,821
========== ============
6. ACCOUNTS RECEIVABLE
SEPTEMBER 30, DECEMBER 31,
1997 1996
$ $
Accounts receivable comprise:
Trade receivables 251,608 139,059
Taxation 1,274,989 116,801
Other debtors receivable within one year 652,371 498,243
Other debtors receivable after one year 692,708 -
---------- ----------
2,871,676 754,103
========== ==========
7. COMMITMENTS AND CONTINGENCIES
TRANSPONDER
A bank guarantee was originally provided to PTT Telecom on November 30,
1995 in the amount of ECU 2,000,000 in relation to an agreement to
lease transponder capacity in order to broadcast a television channel
in Germany. The guarantee required as at September 30, 1997 stood at
ECU 1,350,000 ($1,512,000 at September 30, 1997 exchange rates) and
progressively reduces over the duration of the agreement.
The Company was not in a position to support the guarantee. As a result
the guarantee has been provided by Universal Independent Holdings
Limited ("Universal") (see Note 13). The Company is committed to paying
ECU 3,300,000 ($3,690,000 at September 30, 1997 exchange rates) over
the period October 1, 1997 to September 25, 1998 for use of the
transponder capacity under the terms of the agreement.
10
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
LEASE COMMITMENTS
In August 1995 the Company entered into an agreement to lease studio,
post production and editing facilities in Dortmund, Germany. Under the
terms of the agreement the Company was committed to paying DM 991,000
($561,000 at September 30, 1997 exchange rates) per annum for the use
of these facilities until February 1997. The Company is currently
re-negotiating a short term lease to remain in the facility on more
beneficial terms, although there can be no assurance that this will
occur.
In January 1996 the Company entered into an agreement to lease master
control and broadcast equipment and editing facilities at Ingleheim
Germany. Under the terms of the agreement the Company is committed to
paying DM 2,940,000 ($1,665,000 at September 30, 1997 exchange rates)
per annum for the use of the equipment and facilities until January
2001. The lease can be terminated effective December 1998.
In January 1996, the Company entered into an agreement to lease uplink
capacity until January 1999, at a cost of approximately (pound)245,000
($396,000 at September 30, 1997 exchange rates) per annum.
The Company has also entered into leases for other office space in
Germany, France and the UK, expiring between 1997 and 2002 at an
annualized cost of $420,000 (at September 30, 1997 exchange rates).
TINERAMA
The shareholders' agreement between the Company and Telor International
Limited ("Telor"), provides that if either party wants to transfer its
ownership in Tinerama, it must first offer such ownership interest to
the other party. It also provides that in the first four years
commencing November 15, 1995, either shareholder may force a sale or
purchase of its shares at a price specified in the notice given from
one shareholder to the other.
8. LITIGATION
On May 9, 1996 Com TV Production und Vertrieb GmbH ("Com") and Nen TV
("Nen") in relation to their litigation with the Company served Further
and Better Particulars of the Defense and Counterclaim, which provide
details of matters alleged in the Defense and Counterclaim. The most
significant detail given is that Com and Nen have quantified their
estimated damages at DM3,325,438 ($1,883,000 at September 30, 1997
exchange rates) based on a 5% share in profits over a five year period.
The Company has filed a Reply and Defense to the Counterclaim and
believes that the Counterclaim is without merit and intends to
vigorously contest the same.
In connection with the same matter, the Company commenced proceedings
against Mr. John Garman. A Defense and Counterclaim has been served on
the Company.
Both actions have now been consolidated into one action and an Order
for Directions was made on March 13, 1997 which sets out the steps to
be taken up to and including the trial. Pursuant to the Order,
discovery was concluded by May 2, 1997.
The Company believes that both counterclaims are without merit,
however, there can be no assurance as to the outcome of the claims.
11
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
9. TINERAMA
On June 26, 1997 Tinerama exercised the option available under the
terms of the original acquisition agreement to acquire up to a further
10% of the total issued shares of each of its 51% owned Romanian
subsidiary companies for a total price of Lei 8,000,000 ($1,200 at
September 30, 1997 exchange rates). Consequently, these accounts have
been prepared on the basis of Tinerama's existing 51% shareholdings.
10. WARRANTS
The Company has the following warrants (all of which expire 36 months
from the date of their effective future registration) outstanding at
September 30, 1997.
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 2,300,000
The warrants were issued in connection with a Private Placement
Offering ("the Offering") which took place in December 1995 and January
1996. Warrants to purchase 4,200,000 and 1,000,000 shares of common
stock at exercise prices of $4.00 and $2.50 per share were issued to
investors in the Offering; warrants to purchase 1,000,000 and 433,328
shares of common stock at exercise prices of $4.00 and $3.125 per share
respectively were issued to the placement agent and sub-distributors
for the Offering; and warrants to purchase 1,600,000 and 1,300,000
shares of common stock at exercise prices of $3.125 and $2.50
respectively were issued to certain of the founding shareholders.
11. RE-DOMESTICATION
The Company intends to re-domesticate its legal status to Bermuda or
another non-U.S. jurisdiction as soon as reasonably practicable.
12. BLINK TV LIMITED
The Company has invested $526,000 (at September 30, 1997 exchange
rates) in Blink which is a joint venture arrangement with Mirror Group
PLC ("Mirror"). Mirror owns 50% of the share capital of Blink and has
financed the purchase of equipment for the use of Blink and provided
working capital to Blink. The Company and Mirror jointly control and
manage Blink. The investment in Blink has been accounted for in these
financial statements by the equity method.
12
<PAGE>
CAPITAL MEDIA GROUP LIMITED
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
13. LIQUIDITY AND CAPITAL RESOURCES
The Company is currently using its cash reserves to fund its
operations. Due to the poorer than expected advertising revenues at
Onyx and higher than planned expenditures in connection with the launch
and first year operation of Onyx, the funds raised by the Company in
late 1995 and early 1996 were expended earlier than anticipated.
On January 13, 1997, the Company issued a Private Placement Memorandum
offering its securities to accredited investors including to all
existing shareholders. In the offering, the Company sold an aggregate
of 12,000,000 shares of common stock, $.001 par value per share, at a
purchase price of $0.50 per share. On March 3, 1997, the offering
closed and the aggregate net proceeds to the Company were approximately
$5,850,000 after costs.
On June 30, 1997, the Company received subscriptions for $4 million in
a Private Placement offering of its securities to certain accredited
investors. In the offering, the Company agreed to issue an aggregate of
7,017,543 shares of common stock, $.001 par value per share, at a
purchase price of $0.57 per share. On June 30, 1997, $1,500,000 of the
proceeds of the subscription was received and the balance of $2,500,000
was received on August 1, 1997.
To continue to fund its operations, the Company will need to raise
significant additional short term and long term capital. At present the
Company is considering various options to raise funding for its capital
resources, including potential direct investments by third parties into
Onyx or sales of certain of the Company's investments. However, other
than as set forth herein, no arrangements have been entered into to
date. There can be no assurance that additional working capital will be
available on terms acceptable to the Company. The failure to obtain the
additional funding required will almost certainly have a material and
adverse impact on the Company's operations and financial position.
On October 31, 1996, CM (UK) entered into an agreement to borrow up to
$2.0 million from Instar Holdings, Inc. ("Instar") to fund working
capital requirements ("the Instar loan"). The loan was originally due
for repayment on December 31, 1996, or such earlier date as the Company
raises additional funds to repay the loan. The loan is guaranteed by
the Company and Onyx, and is secured by a charge on substantially all
of the Company's assets. Interest is payable monthly on the loan, at
the rate of 2% above Lloyds Bank's base rate.
The terms of the Instar Loan were amended on August 31, 1997 to provide
that:
(i) the principal repayment date is now December 1, 1997, or if
earlier, the date on which the Company makes a private placement of its
securities (other than referred to in note 4 below) in an amount equal
to or greater than the amount outstanding under the loan; and
(ii) the loan is now convertible, at the option of each holder of a
portion of the loan, into fully paid shares of common stock at a
conversion rate of one share of common stock for each $ 0.50 principal
amount of the loan.
On October 31, 1996, CM (UK) entered into a deed of counter-indemnity
("Deed") with Universal, a BVI corporation. The Deed secures the
obligation of CM (UK) to repay Universal if Universal is called upon to
make payment on its transponder guarantee. (See note 7 to Notes to
Consolidated Financial Statements.)
13
<PAGE>
CM (UK)'s obligations under the Deed are guaranteed by the Company and
Onyx, and are secured by a charge on substantially all of the Company's
assets.
Instar and Universal have agreed that their liens on the Company's
assets shall rank pari-passu.
14. RELATED PARTY TRANSACTIONS
INSTAR HOLDINGS, INC
Hauptmann, Leitner and Townsley have interests of $200,000, $500,000
and $300,000 respectively in the $2.0 million loan provided by Instar
and referred to in Note 13. Messrs. Hauptmann and Leitner were
directors of the Company. Mr. Townsley resigned from the Company's
Board of Directors in January 1997.
TELOR INTERNATIONAL LIMITED
Telor owns 49% of Tinerama and had an amount of $411,600 owing from
that company at March 31, 1997. Mr Hauptmann, a director and
shareholder of the Company, is a principal of Telor.
TOWNSLEY & CO.
Mr. Townsley, a director of the Company until January 1997, is Managing
Director of Townsley & Co., a UK brokerage firm which participated in
the private placement in winter 1995/96, receiving direct commissions
of $210,000, 86,665 shares of common stock and warrants to purchase
86,665 shares and 218,750 shares of common stock at $3.125 and $4.00
respectively.
INTERNATIONAL CAPITAL GROWTH, LTD
The predecessor of International Capital Growth, Ltd ("ICG") was the
placement agent in connection with the winter 1995/96 private
placement, for which it received direct commissions and expense
allowances of an aggregate of $1,339,000, 346,663 shares of common
stock and warrants to purchase 346,663 and 781,250 shares of common
stock at $3.125 and $4.00, respectively. Mr. Hollander, a director of
the company, is Senior Vice-President and a director of ICG.
In April 1997, the Company issued 93,333 shares of Common Stock to ICG
for services.
KESTREL SA
Kestrel SA ("Kestrel"), a Switzerland based investment firm, holds
shares of common stock and warrants in the Company for the benefit of
multiple owners. Clients of Kestrel control Universal which has
arranged for the transponder guarantee referred to in note 7.
15. SUBSEQUENT EVENTS
On October 9, 1997, the Company entered into a short term loan of
$500,000 from a company associated with David Ho, one of the Company's
directors and from an associate of Mr. Ho. The loan is due, with
interest at the rate of 10% per annum on April 8, 1998. The loan is
convertible into shares of the Company's authorized common stock at an
exercise price of $.57 per share (but only at such time as the Company
has sufficient shares of authorized but unissued common stock available
to permit such conversion). In connection with such loan, the Company
has agreed to issue 200,000 shares of common stock to an affiliate of
the lender for arranging the loan.
During October 1997, the Company sold an aggregate of 600,001 shares of
its authorized but unissued common stock to three purchasers in a
private placement. The Company raised $450,000 in this placement. Aside
from a $15,000 commission, the Company paid no other remuneration in
connection with such sales.
During October 1997, the Company sold its interest in an investment
held in a subsidiary company for approximately $540,000.
14
<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,
INCLUDED ELSEWHERE IN THIS FORM 10- QSB. CERTAIN OF THE DATA CONTAINED HEREIN
INCLUDES FORWARD LOOKING INFORMATION AND RESULTS COULD DIFFER FROM THAT SET
FORTH BELOW. THIS DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
INFORMATION CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR
ENDED DECEMBER 31, 1996 (THE "FORM 10-KSB") AND IN THE OTHER SEC FILINGS MADE BY
THE COMPANY DURING 1997.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
Operating revenues for the three and nine months ended September 30,
1997 were $673,678 and $1,548,410, respectively, an increase of $182,157 and
$97,084 compared to operating revenues of $491,521 and $1,451,326, respectively,
for the three and nine months ended September 30, 1996.
The increase in operating revenue from period to period was largely
attributable to an increase in advertising revenue at Onyx Television. The
Company is continuing to take steps to develop Onyx Television's advertising
revenue. The Company has hired several experienced sales agents, who are
working in the major cities in Germany utilizing a newly developed marketing and
sales strategy. The Company believes that over the next few months, Onyx
Television's advertising revenues will progressively increase, although there
can be no assurance that this will, in fact, occur. At September 30, 1997 Onyx
Television's signal reached approximately 9.75 million cable and satellite homes
in Germany.
During the three and nine months ended September 30, 1997, each of the
Tinerama companies continued to operate at a small loss. The combined loss of
the Tinerama companies increased from $32,000 and $100,000, respectively, for
the third quarter and nine month periods in 1996 to $34,000 and $151,000,
respectively, for the third quarter and nine month periods in 1997.
Operating costs, including depreciation and amortization, for the third
quarter of 1997 were $4.0 million, which included a non-cash accounting exchange
translation loss of $0.4 million arising from changes in currency exchange rates
at September 30, 1997 compared to exchange rates at December 31, 1996. Excluding
this non-cash accounting exchange loss, operating costs for the three months
ended September 30, 1997 decreased by $680,000 compared to the three months
ended September 30, 1996.
Operating costs, including depreciation and amortization, for the nine
months ended September 30, 1997 increased to $13.8 million over operating costs
of $12.8 million for the same period in 1996. The nine month 1997 number
included a non-cash accounting exchange translation loss of $2.5 million arising
from changes in currency exchange rates at September 30, 1997 compared to
exchange rates at December 31, 1996.
The decrease in operating costs for the three month period is
principally reflective of the cost reductions made across all the group
operations, which cost reductions were implemented during the
15
<PAGE>
second and third quarters of 1997. Operating expenses of Onyx Television
include programming costs, broadcast studio expenses, transmission expenses and
general and administrative expenses.
Depreciation and amortization for the three and nine month periods ended
September 30, 1997 was $158,222 and $407,587, respectively, compared to $309,073
and $763,016, respectively, for the three and nine month periods ended September
30, 1996. This decrease was due primarily to a reversal of an equipment purchase
arrangement into an operating lease agreement.
For the reasons set forth above, the Company's operating loss for the
three month period ended September 30, 1997 was $3.4 million, a $.9 million
reduction compared to operating losses of $4.3 million for the same period ended
September 30, 1996. The Company's operating loss for the nine months ended
September 30, 1997, increased to $12.3 million, an increase of $.9 million over
the Company's operating loss of $11.4 million for the same period in 1996. Such
increased loss for the nine month periods is reflective of the fact that
increased advertising revenues for Onyx Television and the effects of cost
cutting measures taken during the second and third quarters of 1997 are only
beginning to impact results of operations.
The net loss for the three and nine months ended September 30, 1997 was
$3.5 million ($.10 per share) and $12.6 million ($.44 per share), respectively,
compared to a net loss of $4.2 million ($.32 per share) and $11.2 million ($.91
per share), respectively, for the comparable 1996 periods. Weighted average
shares outstanding increased by 181% and 133%, respectively, for the three and
nine month 1997 periods compared to the three and nine month 1996 periods.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The ownership, development and operation of media interests, including
television and radio stations, television production facilities and publishing,
and the development of a software and Internet entertainment business, requires
substantial capital investment. To date, the Company has financed its capital
requirements through sales of its equity securities and through debt financing.
Since inception through September 30, 1997, the Company has incurred an
accumulated deficit of approximately $31.7 million, principally related to the
Company's launch and operation of Onyx Television. At September 30, 1997, the
Company had a negative working capital of approximately $4.2 million.
In February 1996, the Company completed a private placement of its
securities (the "First Private Placement"). The Company received net proceeds of
approximately $14.4 million in the First Private Placement. These funds, along
with capital infusions to the Company from its founding shareholders in the
amount of $3.0 million, were primarily utilized to fund the startup, launch and
first year of operation of Onyx Television, and for general corporate purposes.
In October 1996, the Company's UK subsidiary, CM (UK), entered into an
agreement to borrow US $2.0 million ("Convertible Debt" or the "Instar Loan")
from Instar Holdings, Inc. ("Instar") to fund the Company's working capital
requirements (principally related to the continuing operation of Onyx
Television). The Convertible Debt is guaranteed by the Company and Onyx and is
secured by a charge on substantially all of the Company's assets. Interest is
payable monthly on the Convertible Debt, at the rate of 2% above Lloyd Bank's
base rate. The Convertible Debt is convertible, at the option of the holder(s)
thereof, into fully paid shares of Common Stock at a
16
<PAGE>
conversion rate of one share of Common Stock for each US $.50 principal amount
of the Convertible Debt.
On July 31, 1997, the Company and Instar entered into a letter of
variation and amendment (the "Instar Amendment") pursuant to which the principal
repayment date of the Convertible Debt was extended until January 20, 1998 (or
such earlier date as the Company completes a public or private offering of its
securities); provided, however, that it shall be an event of default under the
Convertible Debt if the Company's stockholders have not, on or prior to December
1, 1997, approved an amendment to the Company's Articles of Incorporation
increasing the authorized Common Stock sufficient to allow conversion of the
Convertible Debt into Common Stock.
Because the Company does not at present have available sufficient
authorized but unissued shares of its common stock to reserve for issuance upon
the exercise by Instar of its conversion right, the Company has created a series
of convertible Preferred Stock (Series A Preferred Stock) from its authorized
but unissued Preferred Stock which may be issued to Instar (and two present and
one former member of the Company's Board of Directors that are holders of the
Company's outstanding warrants) in the event that an increase in the number of
authorized shares of common stock has not been approved by the shareholders of
the Company at a time when Instar (or such persons) desires to convert the
Instar Loan (and/or such warrants) to Common Stock. For a description of the
terms of the Series A Preferred Stock, see the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997.
The Instar Amendment provides that in the event that Stockholder
Approval has not been obtained, Instar shall have the right at any time by
notice in writing to the Company to convert the Convertible Debt (including
principal and interest) to shares of Series A Preferred Stock at the rate of
$0.50 per share; provided, however, if Stockholder Approval is obtained
following such conversion, then the shares of Series A Preferred Stock then
issued shall immediately and automatically convert into shares of common stock
on a one-for-one basis in accordance with the terms and conditions set forth in
the Certificate of Designations. If, on the other hand, Instar has not converted
the Convertible Debt prior to Stockholder Approval and thereafter Stockholder
Approval is obtained, Instar will have the right to convert the Convertible Debt
into shares of common stock at the rate of $0.50 per share (as may be adjusted
in accordance with the terms of the loan).
The Instar Amendment grants to Instar the same rights of registration
with respect to the shares into which the Convertible Debt is converted (common
or preferred, as applicable) as were granted to the shareholders of Unimedia in
the reorganization agreement between the Company and Unimedia and obligates the
Company to include such shares in the first registration statement filed by the
Company in respect of any of its outstanding shares.
CM(UK) and the Company have also granted a charge against substantially
all of their assets to secure their obligations in connection with the guaranty
of the transponder lease. See Note 7 of Notes to Consolidated Financial
Statements with respect to the guaranty of the transponder lease by Universal
Independent Holdings Limited, a BVI corporation ("Universal"). CM(UK) under its
transponder lease, was required to provide a guaranty to PTT Telecom of its
obligations under the lease. Universal agreed to provide such guaranty, but
required, among other things, (i) that CM(UK) enter into, in favor of Universal,
a deed of counter-indemnity ("Deed") to secure the obligation of
17
<PAGE>
CM(UK) to repay Universal if Universal is called upon to make payment on its
transponder guaranty, (ii) that the Company and Onyx guarantee the obligations
of CM(UK) under the Deed, and (iii) that the Company pledge substantially all of
its assets to secure its obligations in connection therewith. Instar and
Universal have agreed that their liens on the Company's assets shall rank PARI
PASSU. If the Company were to default under either or both of such guaranties
and Instar and/or Universal were to foreclose on the pledge of the Company's
assets, it would likely have a significant and adverse impact on the Company's
financial position, and could result in the Company's loss of its operating
assets.
On March 3, 1997, the Company closed a second private placement in which
the Company raised net proceeds of $5.85 million. The funds from this placement
were used to fund the continuing operation of Onyx Television and for general
corporate purposes. The Company issued an aggregate of 12.0 million shares of
Common Stock in this private placement.
On June 25, 1997, the Company accepted a subscription for $4.0 million
from Unimedia, on behalf of certain investors. In the subscription, the Company
agreed to issue an aggregate of 7,017,543 shares of Common Stock at a purchase
price of $0.57 per share. On June 30, 1997, $1,500,000 of the proceeds of the
subscription was received by the Company and the balance of $2,500,000 was
released to the Company from escrow on July 31, 1997 at the closing of the
Unimedia Acquisition. In connection with the private placement, the Company paid
Unimedia a fee of $240,000, which was netted against the purchase price of the
Shares. Unimedia, in turn, paid a fee to Valfab, S.A. for its services in
connection with introducing Unimedia to certain of the investors who purchased
the shares in the offering. The fee consisted of $192,000 in cash ($75,000 of
which remains due and payable) and 106,666 shares of the Common Stock acquired
by Unimedia in this placement.
On July 31, 1997, the Company acquired 50.3% of the outstanding common
stock of Unimedia in exchange for 4,333,000 shares of the Company's authorized
but unissued common stock. Shareholders of Unimedia who did not participate in
the first closing of the Unimedia share exchange had until September 5, 1997 to
convert their Unimedia securities into shares of Common Stock and on September
5, 1997, the Company acquired an additional 31.3% of Unimedia's common stock in
exchange for an additional 2,693,600 shares of the Company's authorized but
unissued Common Stock.
At the present time, the Unimedia Agreement has expired. The Company
intends to continue a dialogue with the three remaining minority holders of
Unimedia's securities and may, in the future, agree to acquire their Unimedia
securities, although the Company is no longer obligated to do so. The terms of
any such acquisition shall be determined by the Company's Board of Directors and
may be different from the terms of the above-described share exchange.
Unimedia currently owns 4,556,320 shares of the Company's issued common
stock, which are not deemed to be outstanding at this time.
On October 9, 1997, the Company entered into a short term loan of
$500,000 from a company associated with David Ho, one of the Company's
directors, and from an associate of Mr. Ho. The loan is due, with interest at
the rate of 10% per annum on April 8, 1998. The loan is convertible into shares
of the Company's authorized common stock at an exercise price of $.57 per share
(but only at such time as the Company has sufficient shares of
18
<PAGE>
authorized but unissued common stock available to permit such conversion). In
connection with such loan, the Company has agreed to issue 200,000 shares of
common stock to an affiliate of the lender for arranging the loan.
During October 1997, the Company sold an aggregate of 600,001 shares of
its authorized but unissued common stock to three purchasers in a private
placement. The Company raised $450,000 in this placement. Aside from a $15,000
commission, the Company paid no other remuneration in connection with such
sales.
During October 1997, the Company sold its interest in an investment
held in a subsidiary company for approximately $540,000.
The Company anticipates that in the short term, it will be able to
obtain the funds required to continue its present operation. If such short term
capital is not obtained, of which there can be no assurance, it will have a
substantial adverse effect upon the Company. The Company's current operations
require working capital of approximately $1.0 million per month.
Additionally, the Company is seeking additional funding to allow it to
pursue its longer term business objectives. There can be no assurance that the
funding required to further the Company's longer term business objectives will
be obtained. The Company's failure to obtain funding to repay its debts and to
fund its long term business objectives will likely have a substantial and
adverse impact on the Company's financial condition and prospects.
In regard to its capital raising efforts, the Company is likely going
to fund its capital requirements through additional sales of the Company's
equity or debt securities. The Company may also seek funding for particular
projects through investments directly into those projects. In that regard, the
Company may consider selling all or a portion of its investments or operations
to a third party or may consider a joint venture with other media interests. The
Company is also seeking strategic alliances with respect to its other current
and proposed businesses and to reduce operating costs in all of its businesses
whenever possible. No definitive agreements have been entered into to date.
There can be no assurance that the capital or other acceptable
arrangements required to fund the Company's requirements will be obtained. The
Company's failure to raise sufficient funds to repay the Convertible Debt, the
Company's being called on the transponder guaranty, or the Company's failure to
obtain sufficient working capital for its future operations, will likely have a
significant and adverse impact on the Company's financial position, and could
result in the Company's losing its operating assets.
19
<PAGE>
The Company's independent auditors included an explanatory paragraph in
their audit report in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996 stating that the financial statements were prepared
assuming the Company would be able to continue as a going concern and that as a
result of the Company's lack of working capital and losses since inception,
there was a substantial doubt as to the Company's ability to continue as a going
concern. The Company's failure to obtain additional capital or other acceptable
arrangements to continue the business of the Company will have a material and
adverse effect on the Company.
To the extent that the Company finances its activities through the
issuance of additional equity securities, any such issuance would result in
dilution to the interests of the Company's shareholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities in
connection with financing activities, the Company will be subject to all of the
risks associated with incurring substantial indebtedness, including risks
associated with pledging assets of the Company and the risks that interest rates
may fluctuate and cash flow may be insufficient to pay principal and interest on
any such indebtedness.
The Company maintains its financial statements in dollars and holds the
majority of its funds in United States dollars, pounds sterling, German Deutsche
marks and French Francs. Amounts paid to the Company are payable in various
currencies, which are subject to independent fluctuating exchange rates with the
U.S. dollar, the pound, the Deutsche Mark and the Franc. In the event of a
devaluation in a particular currency between the time its income arises and the
time such income is received and converted by the Company into U.S. dollars, the
Company would suffer an exchange loss which could materially and adversely
affect the Company's financial condition, results of operations and/or cash
flows. The Company does not hedge against foreign currency exchange rate risks.
Because of the number of currencies involved, the constantly changing currency
exposures and the fact that all foreign currencies do not fluctuate in the same
manner against the United States dollar, the Company cannot predict with any
certainty the future effect, if any, from period to period, of exchange rate
fluctuations on its financial condition or results of operations. However, such
fluctuations have been materially adverse in the past and may be materially
adverse in the future.
20
<PAGE>
PART 2
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in several lawsuits all relating to the relationship
between CM (UK) and John Garman. For information regarding the current status of
these suits, see Item 3 of the Company's Annual Report on Form 10-KSB.
ITEM 2. CHANGE IN SECURITIES
See Note 10 to the Notes to the Company's Unaudited Financial Statements
included herewith and Item 5 below.
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
Effective November 12, 1997, Stephen Kornfeld is no longer a consultant
to the Company. Mr. Kornfeld remains a director of the Company.
In October 1997, Marc Sillam resigned as a director of the Company.
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule.
(b) A Current Report on Form 8-K was filed by the Company on September 29,
1997 to provide the historical and proforma financial information
required in connection with the Company's acquisition of an 81.6%
interest in Unimedia.
22
<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 November, 1997.
CAPITAL MEDIA GROUP LIMITED
By: /s/ Gilles Assouline
-------------------------------------------
Gilles Assouline, Chairman, President and
Chief Executive Officer
By: /s/ Stephen Coleman
-------------------------------------------
Stephen Coleman, Chief Financial Officer
23
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 453,541
<SECURITIES> 0
<RECEIVABLES> 2,871,676<F1>
<ALLOWANCES> 0
<INVENTORY> 374,546
<CURRENT-ASSETS> 4,264,094
<PP&E> 1,336,201<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,158,183
<CURRENT-LIABILITIES> 8,468,361
<BONDS> 1,110,895<F3>
0
0
<COMMON> 1,578,927
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,158,183
<SALES> 673,678
<TOTAL-REVENUES> 673,678
<CGS> 0
<TOTAL-COSTS> 4,054,658
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,522,310)
<INCOME-TAX> 1,003
<INCOME-CONTINUING> (3,521,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,521,307)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> 0
<FN>
<F1>Net of allowance for doubtful accounts of $11,470.
<F2>Net of depreciation.
<F3>Minority interest in subsidiaries.
</FN>
</TABLE>
