SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File No. 001-12739
CAPITAL MEDIA GROUP LIMITED
---------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0453100
---------------------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2 rue du Nouveau Bercy
94220, Charenton, France
---------------------------------------- ---------------------------
(Address of Principal Executive (Zip Code)
Offices)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of September 30, 2000,
there were 32,436,460 shares of the Common Stock issued and outstanding
(excluding shares held by a subsidiary).
Transitional Small Business Disclosure Format (check one)
Yes [X] No [ ]
<PAGE>
Part I. Financial Information
Page
Item 1. FINANCIAL STATEMENTS
Unaudited financial statements for the quarter covered by
this report are attached herein in accordance with item
310(b) of Regulation S-B.
Index to Financial Statements
Unaudited Consolidated Balance Sheet at September 30, 2000
and December 31, 1999 .......................................... 3
Unaudited Consolidated Statement of Operations for the three
and nine months ended September 30, 2000 and
September 30, 1999 ............................................. 4
Unaudited Consolidated Statement of Stockholders' Equity at
September 30, 2000 and December 31, 1999 ....................... 5
Unaudited Consolidated Statement of Cash Flows for the nine
months ended September 30, 2000 and September 30, 1999 ......... 6
Notes to Unaudited Consolidated Financial Statements .............. 7
<PAGE>
UNAUDITED CONSOLIDATED BALANCE
SHEET AT SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
Note (unaudited)
<S> <C> <C> <C>
ASSETS $ $
Cash and cash equivalents 856,585 181,352
Accounts receivable trade, net of allowances
for doubtful accounts of $19,498 3 1,398,730 1,345,979
(December 31, 1999 - $28,234)
Inventories, net 186,528 114,744
Prepaid expenses and deposits 38,977 33,784
TOTAL CURRENT ASSETS 2,480,820 1,675,859
----------- -----------
Investments -- 6,985
Equity in affiliated companies 85,650 112,725
Intangible assets, net of accumulated amortization of 4 1,767,568 2,204,271
$3,599,711 (December 31, 1999 - $3,171,811)
Property, plant and equipment, net 1,058,529 1,085,253
----------- -----------
TOTAL ASSETS 5,392,567 5,085,093
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 3,839,180 2,223,375
Accrued expenses 1,139,998 1,620,310
Related parties loans repayable within one year 5 3,071,375 1,259,583
Bank debt due within one year 2,022,467 1,607,007
----------- -----------
TOTAL LIABILITIES 10,073,020 6,710,275
Minority Interest in Subsidiaries 408,132 402,477
----------- -----------
10,481,152 7,112,752
----------- -----------
Commitments and Contingencies -- --
STOCKHOLDERS' EQUITY
Common stock - 50,000,000 shares authorized:
$0.001 par value 32,603,251 (December 31, 1999 - 10 32,603 28,580
28,583,251) issued and outstanding,
Additional paid in capital 60,380,902 55,771,258
166,791 shares held by subsidiary (December 31,
1999 - 166,791) at cost (950,712) (950,712)
----------- -----------
59,462,793 54,849,126
Cumulative translation adjustment 7,117,623 5,986,265
Accumulated deficit (71,669,001) (62,863,050)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (5,088,585) (2,027,659)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 5,392,567 5,085,093
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
For the three and nine months ended September 30, 2000 and September 30, 1999
<TABLE>
<CAPTION>
3 months 3 months 9 months 9 months
ended ended ended ended
September September September September
Note 30,2000 30,1999 30,2000 30,1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
$ $ $ $
<S> <C> <C> <C> <C> <C>
Operating revenue 573,067 783,002 2,136,509 2,247,358
Operating costs
Staff costs 657,349 566,091 1,995,726 1,685,754
Depreciation and amortisation 225,603 277,579 713,374 770,048
Other operating expenses 2,107,967 1,619,120 6,374,018 5,133,732
----------- ----------- ----------- -----------
(2,990,919) (2,462,790) (9,083,118) (7,589,534)
Operating loss (2,417,852) (1,679,788) (6,946,609) (5,342,176)
Other (expense) (22,667) 804,518 40,178 709,304
Financial (expense) income net 7 18,883 (507,540) (1,959,571) (6,490,111)
Equity in net loss of affiliates (5,933) (39,054) (27,075) (89,777)
----------- ----------- ----------- -----------
Loss from continuing operations (2,427,569) (1,421,864) (8,893,077) (11,212,760)
before taxation
Income tax benefit (expense) (9) 1,525 (307) 3,265
----------- ----------- ----------- -----------
(2,427,578) (1,420,339) (8,893,384) (11,209,495)
Discontinued operations 9
Loss from operation of discontinued -- (32,662) -- (48,557)
subsidiary
----------- ----------- ----------- -----------
Net loss before minority interest (2,427,578) (1,453,001) (8,893,384 (11,258,052)
Minority interest 87,433 -- 87,433 --
----------- ----------- ----------- -----------
Net loss (2,340,145) (1,453,001) (8,805,951) (11,258,052)
Net loss per share for continuing
operations - basic ($ 0.08) ($ 0.35) ($ 0.29) ($ 2.80)
- diluted ($ 0.08) ($ 0.35) ($ 0.29) ($ 2.80)
Net loss per share including
discontinued operations - basic ($ 0.08) ($ 0.36) ($ 0.29) ($ 2.81)
- diluted ($ 0.08) ($ 0.36) ($ 0.29) ($ 2.81)
Weighted average shares - basic 30,780,473 4,009,413 29,864,362 4,009,413
Weighted average shares - diluted 30,780,473 4,009,413 29,864,362 4,009,413
=========== =========== =========== ===========
</TABLE>
3
<PAGE>
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 2000 and the year ended December 31,
1999
<TABLE>
<CAPTION>
Cumulative
Shares Additional other
held by paid-in comprehensive Accumulated
Common stock subsidiary capital income (deficit) deficit Total
Shares $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 2000 28,583,251 28,583 (950,712) 55,771,255 5,986,265 (62,863,050) (2,027,659)
Shares Issued 4,020,000 4,020 -- 4,609,647 4,613,667
Translation adjustment 1,131,358 1,131,358
Net loss -- -- -- -- (8,805,951) (8,805,951)
-----------
Comprehensive loss (7,674,593)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
September 30, 2000 32,603,251 32,603 (950,712) 60,380,902 7,117,623 (71,669,001) (5,088,585)
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
Cumulative
Shares Additional other
held by paid-in comprehensive Accumulated
Common stock subsidiary capital income (deficit) deficit Total
Shares $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1999 4,009,413 4,009 (950,712) 31,191,990 756,406 (48,238,074) (17,236,381)
Shares Issued 24,573,838 24,574 24,669,265 24,693,839
Commission paid (90,000) (90,000)
Translation adjustment -- -- -- -- 5,229,859 5,229,859
Net loss -- -- -- -- (14,624,976) (14,624,976)
-----------
Comprehensive loss (9,395,117)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1999 28,583,251 28,583 (950,712) 55,771,255 5,986,265 (62,863,050) (2,027,659)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2000 and September 30, 1999
<TABLE>
<CAPTION>
Restated
9 months ended 9 months ended
September 30, September 30,
2000 1999
$ $
<S> <C> <C>
Cash flows from operating activities
Net loss (8,805,951) (11,258,052)
Adjustment to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 713,374 770,048
Equity in net losses of affiliates and minority interests 32,729 89,777
Changes in assets and liabilities :
(Increase) / Decrease in other assets and inventories (76,499) 119,310
(Increase) / Decrease in accounts receivable (52,751) 373,654
Increase in accrued expenses and other liabilities 1,285,654 1,827,246
----------- -----------
Net cash used in operations (6,903,444) (8,078,017)
----------- -----------
Cash flows from investing activities
Acquisition of plant and equipment (221,317) (731,122)
Acquisition of intangible assets (29,106) --
Disposal of financial assets 6,985 --
----------- -----------
Net cash (used) in investing activities (243,438) (731,122)
----------- -----------
Cash flows from financing activities
Increase in short term debt 1,911,630 7,221,313
Repayment of loans (250,000) (2,700,000)
Issuance of shares 4,613,667 --
----------- -----------
Net cash provided by financing activities 6,275,297 4,521,313
----------- -----------
Effect of exchange rate changes on cash 1,131,358 3,094,379
----------- -----------
Net (decrease) / increase in cash and cash equivalents 259,773 (1,193,447)
Cash and cash equivalents at beginning of period (1,425,655) 583,320
----------- -----------
Net (debt) / cash and cash equivalents at end of period (1,165,882) (610,127)
=========== ===========
Supplemental data:
Interest paid 367,594 810,044
Income tax paid 322 430
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements are prepared in
conformity with generally accepted accounting principles in the United
States of America.
Principles of consolidation
The unaudited 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 the Company's 98.33% owned
subsidiary Unimedia SA ("Unimedia") and Unimedia's wholly owned
subsidiary, Pixel Limited ("Pixel"), and its 98.66% owned subsidiary
TopCard SA ("TopCard"). All inter company accounts and transactions
have been eliminated in consolidation. Pixel's 47.5% interest in Henry
Communications Limited ("Henry"), have been accounted for using the
equity method, after the elimination of all significant intercompany
balances and transactions.
Tinerama Investment AG ("Tinerama"), a 51% owned subsidiary, was sold
in December 1999 (See Note 6). CM(UK)'s 50% interest in Blink TV
Limited ("Blink") was sold in December 1999. Neither of these former
investments is consolidated.
Interim Adjustments
The consolidated financial statements as of, and for the periods ended
September 30, 2000 and September 30, 1999, 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 period presented.
The results of operations for the interim periods should not be
considered indicative of results expected for the full year.
Intangible Assets
Intangible assets represent purchased broadcast licenses, computer
software and goodwill arising on acquisition of subsidiary
undertakings. The amounts in the balance sheet are stated net of the
related accumulated amortization. Computer software is amortized in the
year of their acquisition. Broadcast licenses and goodwill are
amortized on a straight-line basis over periods not exceeding six
years. The Company evaluates the possible impairment of long-lived
assets, including intangible assets, whenever events or circumstances
indicate that the carrying value of the assets may not be recoverable,
by comparing the undiscounted future cash flows from such assets with
the carrying value of the assets. An impairment loss would be computed
based upon the amount by which the carrying amount of the assets
exceeds its fair value at any evaluation date.
6
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
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:
Fixtures, fittings and equipment 5 to 20 years
Foreign Currency
Assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates. Income statement items are
translated at the average rate for the period. The effects of these
translation adjustments are reported in a separate component of
stockholders' 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.
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
realized.
Revenue recognition
Sales are recognized when products and services are delivered and when
advertisements are broadcast and thereby invoiced to the customer.
Inter-company charges are eliminated on consolidation and not included
in revenues.
Research and development costs
Research and development costs are charged to expense as incurred.
Earnings per share and reverse split
Basic income per share is calculated on the basis of weighted average
outstanding shares. Diluted income per share is computed on the basis
of weighted average outstanding common shares, plus potential common
shares assuming exercised stock options and conversion of outstanding
convertible securities where issued. The computation of earnings per
share does not assume exercise of the warrants or options if they would
have an anti-dilutive effect on earnings per share.
On October 27, 1999, the Company effected a reverse split of its
outstanding common stock on a one share for ten share basis, and its
authorized shares remaining at 50 million shares (see Stockholders'
Meeting below). Unless otherwise stated, all per share data contained
herein has been adjusted to reflect the completion of the reverse
split.
7
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
Use of estimates
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.
Last Stockholders Meeting
The last Stockholders Meeting took place on October 22, 1999. During
this meeting, the stockholders approved the following resolutions;
(i) a reverse split of the Company's outstanding stock on a one
share for ten shares basis, with the Company's authorized
shares remaining at 50 million shares;
(ii) the terms of the financial arrangements between the Company
and AB Groupe S.A., and between the Company and Superstar
Ventures Limited ("Superstar") (see Notes 10 and 11); and
(iii) the grant of an option to an entity controlled by the
Company's Chairman and Chief Executive and Chief Operating
Officer to purchase 1.6 million shares of the Company's common
stock at an exercise price of $1.00 per share (see Note 10.2).
Following the reverse split, which was effected on October 27, 1999, in
accordance with its financial arrangements among the Company, AB Groupe
and Superstar, the Company issued 22,598,255 shares to AB Groupe and
Superstar, in conversion of $22,598,255 of outstanding convertible
debt, including $4,649,839 of accrued interest (see Note 10 and 11).
At September 30, 2000, the Company has 32,603,251 shares of common
stock issued and outstanding, including 166,791 shares owned by
Unimedia.
8
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
2. GOING CONCERN
The accompanying financial statements have been prepared on the going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the financial statements, during the period ended September 30, 2000
and the year ended December 31, 1999, the Company incurred net losses
of $8,805,951 and $14,624,976 respectively.
At September 30, 2000, the Company had net current liabilities of
$7,592,200 and its total liabilities exceeded its total assets by
$5,088,585. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period
of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of the 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 11, the Company's continuation as a going concern is
dependent upon its ability to obtain additional financing as may be
required, and ultimately to attain successful operations.
9
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
3. ACCOUNTS RECEIVABLE
September 30, December 31,
2000 1999
Accounts receivable comprise: $ $
Trade receivables 739,334 500,954
Taxation receivable 19,300 37,654
Other debtors receivable 640,096 807,371
--------- ---------
1,398,730 1,345,979
========= =========
4. INTANGIBLE ASSETS
September 30, December 31,
2000 1999
$ $
Purchased broadcast licenses 220,337 241,755
Computer software 566,085 569,131
Other intangible assets 13,482 --
Goodwill 4,567,376 4,565,196
---------- ----------
5,367,280 5,376,082
Less accumulated amortization (3,599,712) (3,171,811)
---------- ----------
1,767,568 2,204,271
========== ==========
Goodwill net of amortization is as follows:
September 30, December 31,
2000 1999
$ $
Unimedia 1,328,758 1,674,695
TopCard 365,519 452,232
Pixel 35,200 53,965
--------- ---------
1,729,477 2,180,892
========= =========
10
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
5. LOANS REPAYABLE WITHIN ONE YEAR
September 30, December 31,
2000 1999
$ $
Instar Holdings Ltd -- 100,000
AB Groupe S.A 2,888,969 977,339
Superstar Investments Ltd -- 150,000
Interest accrued 182,406 32,244
--------- ---------
Related party loans 3,071,375 1,259,583
========= =========
The terms of AB Groupe loan are detailed in Note 11.
6. DISCONTINUED OPERATIONS AND DIVESTMENTS
TINERAMA
During 1998, the Company approved a decision to sell its interests in the
Romanian group of companies, Tinerama. The sale was for a nominal sum and the
transaction agreed in November 1999 closed in February 2000. The results of the
Tinerama business in 1999 were reported separately as a discontinued operation.
BLINK
In December 1999, the 50% interest in Blink held by CM(UK) was sold to RCL
Communications Ltd, the other joint investor for a nominal sum and converted our
(pound) 130,000 (approximately $200,000) of existing loans to Blink into new
redeemable equity equating to 19% of Blink. If successful in the future, Blink
will be obligated to repay the redeemable equity.
11
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
7. FINANCIAL EXPENSE
Financial expense is comprised of the following:
9 months ended 9 months ended
September 30, September 30,
2000 1999
$ $
Interest expense/(income) 550,000 3,674,052
Foreign currency exchange loss 1,409,571 2,816,059
The foreign currency exchange loss in 2000 and in 1999 arose primarily
from the exchange differences arising in the inter-company loan between
CM(UK) and Onyx recorded in pounds sterling and German Marks,
respectively. Decision was taken in September that would allow CMG
Limited to recapitalise ONYX and permit the reimbursement of amounts
borrowed from CM (UK) by ONYX. The reimbursement rates were
contractually fixed as those at January 1, 2000 resulting in a reversal
of some of the exchanges losses already recorded. These inter-company
loans were effectively reimbursed in October 2000.
8. INCOME TAXES
Net operating loss carry forwards which give rise to deferred tax
assets at September 30, 2000 and December 31, 1999 are as follows:
September 30, December 31,
2000 1999
$ $
Deferred tax asset on unrealized tax losses 27,472,000 23,251,000
Timing differences 400,000 409,000
---------- -----------
Valuation allowances (27,872,000) (23,660,000)
---------- -----------
Total deferred tax assets -- --
========== ===========
The Company has significant deferred tax assets (approximately
$27,872,000) corresponding to tax losses arising primarily from the
operating losses incurred by Onyx in Germany. These tax losses are
available to be carried forward indefinitely to be set off against
future profits in Germany. However, at the end of 1999 and in September
2000, the management forecast that the Company will not be profitable
in 2000 and therefore no credit for income tax was recorded. The
Company will continue to review its tax valuation allowance in future
periods.
The UK General Commissioner of Income Tax has fixed a hearing on
December 14, 2000, with respect of CM(UK)'s appeal against an
assessment from the UK Inland Revenue Administration requesting that
CM(UK) pay taxes and penalties in the amount of (pound) 330,000
(approximately $508,000). CM(UK) is contesting this assessment and
there can be no assurance as to the outcome of this matter.
12
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
Pursuant to the postponement application filed by the Company, the Tax
Administration has agreed to postpone the payment of the required tax
while disputed by the Company.
9. LITIGATION
In June 1997, a former managing director of Onyx whose employment was
terminated brought suit in Germany for alleged wrongful early
termination of his employment. Onyx maintained that the action taken
was lawful and in July 1998, the court ruled in favor of Onyx. The
plaintiff appealed against the ruling and has claimed DM168,000
(US$86,000) in respect of his 1997 salary. The court is now considering
new evidence put forward by Onyx, which believes that it has valid
defenses to this claim. However, there can be no assurance as to the
outcome of the matter.
In February 2000, Onyx paid $235,000 in full settlement of a dispute
with TV Strategies, a Dallas, Texas based television services company,
which alleged that they had provided services to Onyx.
Unimedia has two minority shareholders (Oradea and Roland Pardo) who
have unsuccessfully brought numerous legal actions against Unimedia
and/or its management, among which is the one pursuant to which they
were recently condemned by the French Court to pay damages to Unimedia
for having maintained abusive liens on all Unimedia assets after
Unimedia settled their loans in July 1999. Oradea and R. Pardo have
also brought a legal action through the Court of England against
Montague Koppel and Gilles Assouline with respect to their investment
in both Unimedia and ActivCard. The Court will soon consider a strike
out application filed by Gilles Assouline who believes that he has
strong and valid defense. However there can be no assurance as to the
outcome of the matter. The Company has indemnified Mr. Assouline with
respect to this matter.
In August 2000, Gralec Establishment, a shareholder of the company,
brought a legal action against Unimedia before the Court of France with
respect to the alleged still existing rights of Gralec to purchase
50,000 ActivCard shares from Unimedia at $13.00 each according to an
option granted in October 1996 which expired in February 1997. In
October 2000, the court dismissed Gralec and ordered Gralec to pay
damages and legal fees to Unimedia.
10. CAPITAL STRUCTURE
At the last Stockholder's Meeting on October 22, 1999, the stockholders
approved a reverse split of the Company's authorized capital on a one
new share for ten old shares basis, with the Company's authorized
shares remaining at 50 million shares. Unless otherwise noted, all
share and per share references herein reflected completion of the
reverse split on October 27, 1999.
13
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
10.1 WARRANTS
The Company has the following issued and vested warrants to purchase
common stock outstanding at September 30, 2000 and December 31, 1999:
September 30, December 31,
Description 2000 Exercised Granted 1999
Warrants for common stock 633,914 633,914
Exercisable at $40.00 *
Warrants for common stock 51,119 51,119
Exercisable at $31.25 *
Warrants for common stock 129,767 129,767
Exercisable at $25.00 *
Warrants for common stock 6,537,339 (650,000) 3,650,000 3,537,339
Exercisable at $1.00 **
---------- --------- ---------- -----------
7,352,139 (650,000) 3,650,000 4,352,139
========== ========= ========== ===========
* registered with the SEC
** 650,000 warrants were exercised by Superstar in September 2000.
All outstanding registered warrants expire on January 19, 2003, being
36 months from the date of the effective registration of their
underlying shares.
In January 2000, the Company granted two year warrants to purchase
1,650,000 shares at an exercise price of $1.00 per share. These
warrants were granted to staff members for 250,000; to Jean Francois
Klein for 650,000; to David Ho for 250,000; to Gilles Assouline for
250,000 and to Michel Assouline for 250,000. These warrants were
converted in March 2000 into warrants to purchase Company common stock
at a purchase price of $1.00 per share exercisable from March 17, 2000
until a three year period following the effective registration of all
warrants.
14
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
In January 2000, AB Groupe and Superstar made a loan to the Company in
the aggregate of $1,000,000. The loan is due in two years and carries
interest at the rate of 10% per annum. In connection with the loan, the
Company granted a two-year warrant to purchase 1,000,000 shares of the
Common Stock at an exercise price of $1.00 per share.
In March 2000, Groupe AB loaned the Company an additional $1,000,000
for working capital. The loan is due in two years and carries interest
at the rate of 10% per annum. In connection with the loan, the Company
granted a two-year warrant to purchase 1,000,000 shares of the Common
Stock at an exercise price of $1.00 per share.
In September, 2000 Superstar exercised outstanding warrants to purchase
650,000 shares at $1.00 per share.
10.2 OPTIONS
On August 1, 1997, the Company entered into three year employment
agreements with the executive officers providing for them to receive in
addition to other compensations, options to purchase 20,000 and 17,500
shares of common stock at an exercise price of $5.70 per share, the
price at which transactions were effected at that time. All of these
options have vested. These options expire 36 months from the date of
their effective registration. The employment agreements were
automatically renewed in September.
The former Chief Financial Officer as part of his service agreement was
entitled to receive options in each of the years 1996, 1997 and 1998 to
purchase in aggregate, 30,000 common shares of the Company at $25.00
per share, the price at which transactions were effected at the time.
These options expire 36 months from the date of their effective
registration.
On March 10, 1998, the Board of Directors granted options to four
executive officers of the Company to purchase an aggregate of 400,000
shares of common stock at an exercise price of $3.50 per share (the
price at which common stock was negotiated on the date of grant). On
the same date, non-employee directors were granted options to purchase
an aggregate of 50,000 shares at the same price. The options vested to
executive officers, 20,000 each in 1998, with the balance over 3 years,
and to non-employee directors immediately. The options are valid for 5
years and expire on March 10, 2003.
In 1998, Unimedia transferred 154,000 shares of Common Stock to Gralec
Establishment for an aggregate purchase price of $500,000. The shares
of Common Stock transferred to Gralec have now been registered. The
Company, however, failed to register the Common Stock by November 30,
1999, as required under a registration rights agreement. In order to
extend the period during which registration of the Common Stock could
be completed, the Board approved on December 29, 1999, (1) to sell to
Gralec 220,000 shares against transfer of the net proceeds from the
sale of 50,000 ActivCard shares previously sold by Unimedia to Gralec
in 1996, and (2) to grant Gralec Establishment an additional option to
purchase 600,000 shares of our authorized but issued Common Stock at an
exercise price of $1.00 per share for a period of nine months.
15
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
COMMON STOCK PURCHASE OPTIONS
<TABLE>
<CAPTION>
Description Outstanding at Granted Outstanding at
September 30, December 31,
2000 1999
<S> <C> <C> <C>
Exercisable @ $1.00 600,000 600,000 --
Executive officers options exercisable @ $5.70 37,500 37,500
of which vested 37,500 30,000
Officers options exercisable @ $25.00 fully vested 30,000 30,000
Executive officers options exercisable @ $3.50 400,000 400,000
of which vested 400,000 159,998
Non-employee directors options exercisable @
fully vested $ 3.50 50,000 50,000
--------- --------- ---------
Total exercisable 1,117,500 600,000 517,500
========= ========= =========
</TABLE>
10.3 ISSUANCE OF COMPANY SHARES
In March 2000, the Company granted management the right to purchase up
to 6.5 million shares on or before December 31, 2000, as detailed
below:
Gilles Michel Jean-Francois
Purchase Price Assouline Assouline Klein David Ho Total
$1 per share 750,000 1,100,000 750,000 750,000 3,350,000
$1.50 per share 250,000 300,000 250,000 250,000 1,050,000
$2 per share 250,000 300,000 250,000 250,000 1,050,000
$2.50 per share 250,000 300,000 250,000 250,000 1,050,000
--------- --------- --------- --------- ---------
Total 1,500,000 2,000,000 1,500,000 1,500,000 6,500,000
========= ========= ========= ========= =========
The terms and conditions of this proposed share issuance were
recommended by the audit committee on March 17, 2000. In concluding
this price to be the fair value for the shares, the audit committee
took into consideration the level of funding of the Company required
until the end of 2000 and the poor level of trading activity of the
Company's shares on the market (making, in their view, the market price
of the Common Stock unreliable as a factor in determining value). The
audit committee further considered the placement of new issued shares
under similar terms and conditions in favor of the non-affiliate
shareholders of the Company and recommended this be done in the future.
The Board intends that such a placement will be proposed during the
next shareholder's meeting.
The Board on April 21, 2000 authorized the issue of up to 500,000
shares to each Group AB and Superstar at $1.50 each prior to July 2000.
Out of these, 780,000 shares were effectively issued and paid. Groupe
AB and Superstar purchased 480,000 new shares and 300,000 shares
respectively, out of which an aggregate number of 280,000 shares were
effectively subscribed prior to June 30, 2000 and 500,000 shares were
effectively subscribed in July 2000.
16
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
In May 2000, the Board proposed to issue 1,000,000 Company shares to
Roger Orf at a purchase price of $2.50 per share prior to July 31,
2000. Roger Orf did not purchase these shares.
In September 2000, Superstar exercised 650,000 warrants and 650,000
shares of Common Stock were issued by the Company to Superstar.
PRO-FORMA NET LOSS AND NET LOSS PER SHARE
The Company has adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" and, as permitted under SFAS
No.123 applies Accounting Principles Board Opinion ("APB") No 25 and
related interpretations in accounting for its stock options. Since the
Company awarded the stock options with no discount as compared with the
market price at the time of the grants, there was no related
compensation costs for any of the years presented based on the
estimated grant date fair value as defined by FAS 123. The Company
pro-forma net loss and loss per share for the nine months ended
September 30, 2000 and 1999 are as follows:
September 30, September 30,
2000 1999
$ $
Pro forma net loss (8,805,951) (11,258,052)
Basic and diluted
Pro forma net loss per share (0.29) (2.81)
Basic and diluted
11. LIQUIDITY AND CAPITAL RESOURCES
The Company has continued to use its cash reserves to fund its
operations. The ownership, development and operation of media
interests, including the Onyx television station requires substantial
funding. Due to the poorer than expected advertising revenues at Onyx
in its second and third years of operation, the funds raised by the
Company since commencement were expended earlier than anticipated. To
date the Company has historically financed itself through sales of
equity securities and debt financing.
Following the reverse split, in accordance with its financial
arrangements with AB Groupe and Superstar, the Company issued
22,598,255 post reverse split shares in conversion of $22,598,255 of
outstanding convertible debt, including $4,649,839 of accrued interest.
The Company also issued 789,999 additional shares in conversion of
$790,000 of certain sundry loans and also issued 344,000 additional
shares to other parties to which it was obligated, including Instar
Holdings Inc. which received 200,000 shares as part of its settlement
with the Company.
17
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
In December 1999, AB Groupe made a loan to the Company in the amount of
$500,000. The loan is due in two years and carries interest at the rate
of 10% per annum. In connection with the loan, the Company granted a
two-year warrant to purchase 500,000 shares of the Common Stock at an
exercise price of $1.00 per share.
In January 2000, AB Groupe and Superstar made loans to the Company in
the aggregate of $1,000,000. The loan is due in two years and carries
interest at the rate of 10% per annum. In connection with the loan, the
Company granted a two-year warrant to purchase 1,000,000 shares of the
Common Stock at an exercise price of $1.00 per share. In March 2000, AB
Groupe loaned the Company an additional $1,000,000 for working capital.
The loan is due in two years and carries interest at the rate of 10%
per annum. In connection with the loan, the Company granted a two-year
warrant to purchase 1,000,000 shares of the Common Stock at an exercise
price of $1.00 per share.
12. SEGMENT INFORMATION BY ACTIVITY AND GEOGRAPHIC AREA
The following financial information is summarized by business segment
and country.
- The television media segment contains the operations of Onyx; and
- The technology segment contains the operations of Unimedia, Pixel and
TopCard.
Capital Media Group's activities are concentrated in Germany, France
and Israel (Revenues account for: to September 2000 - approximately
73%,13% and 14% respectively, to September 1999 - approximately 66%,
17% and 17% respectively).
18
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
<TABLE>
<CAPTION>
Television Elimination &
Nine months ended September 30, 2000 Media Technology Corporate TOTAL
<S> <C> <C> <C> <C>
Revenues 1,563,917 572,592 -- 2,136,509
Inter-segment revenues -- -- -- --
---------- ---------- ---------- ----------
Total revenues 1,563,917 572,592 -- 2,136,509
Income (losses) from operations (5,386,895) (661,441) (898,273) (6,946,609)
Other income (expense) 262,257 41,150 (263,229) 40,178
Interest expenses (104,483) (48,971) (396,546) (550,000)
Other financial income (expense), net (91,681) 120,846 (1,438,736) (1,409,571)
Equity in net losses of affiliates -- (27,075) -- (27,075)
Income tax benefit (85) (222) -- (307)
Minority interest 87,433 -- -- 87,433
---------- ---------- ---------- ----------
Net loss (5,233,454) (575,713) (2,996,784) (8,805,951)
========== ========== ========== ==========
Total assets 2,171,923 3,099,802 120,842 5,392,567
========== ========== ========== ==========
Capital expenditure 146,565 74,905 (153) 221,317
========== ========== ========== ==========
Depreciation of fixed assets 195,035 51,145 1,383 247,563
========== ========== ========== ==========
<CAPTION>
Other
Germany France Israel Corporate TOTAL
<S> <C> <C> <C> <C>
Revenues 1,563,917 275,592 297,000 -- 2,136,509
Inter-segment revenues -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total revenues 1,563,917 275,592 297,000 -- 2,136,509
Income (losses) from operations (5,386,895) (705,154) 43,713 (898,273) (6,946,609)
Other income (expense) 262,257 41,628 (478) (263,229) 40,178
Interest expenses (104,483) 29 (49,000) (396,456) (550,000)
Other financial income (91,681) (64,777) 185,623 (1,438,736) (1,409,571)
(expense), net
Equity in net losses of -- -- (27,075) -- (27,075)
affiliates
Income tax benefit (85) (222) -- -- (307)
Minority interest 87,433 -- -- -- 87,433
---------- ---------- ---------- ---------- ----------
Net loss (5,233,454) (728,496) 152,783 (3,615,338) (8,805,951)
========== ========== ========== ========== ==========
Total assets 2,171,923 1,586,952 1,512,850 120,842 5,392,567
========== ========== ========== ========== ==========
Capital expenditure 146,565 71,744 3,161 (153) 221,317
========== ========== ========== ========== ==========
Depreciation of fixed assets 195,035 28,462 22,683 1,383 247,563
========== ========== ========== ========== ==========
</TABLE>
19
<PAGE>
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000
<TABLE>
<CAPTION>
Nine months ended September 30, 1999 Television Technology Elimination & TOTAL
Media Corporate
<S> <C> <C> <C> <C>
Revenues 1,478,071 769,287 -- 2,247,358
Inter-segment revenues -- -- -- --
----------- ----------- ----------- -----------
Total revenues 1,478,071 769,287 -- 2,247,358
Income (losses) from operations (3,316,271) (215,373) (1,810,532) (5,342,176)
Other income (expense) 90,450 138,119 480,735 709,304
Interest expenses (60,233) (79,985) (3,533,834) (3,674,052)
Other financial income (expense), net (2,479,318) 23,012 (359,753) (2,816,059)
Equity in net losses of affiliates -- 26,788 (116,565) (89,777)
Loss in discontinued business -- -- (48,557) (48,557)
Income tax benefit 3,695 (430) -- 3,265
----------- ----------- ----------- -----------
Net loss (5,761,677) (107,869) (5,388,506) (11,258,052)
=========== =========== =========== ===========
Total assets 1,457,077 2,850,220 1,214,628 5,521,925
=========== =========== =========== ===========
Capital expenditure 731,122 -- -- 731,122
=========== =========== =========== ===========
Depreciation of fixed assets 240,818 72,982 9,712 323,512
=========== =========== =========== ===========
<CAPTION>
Germany France Israel Other Corporate TOTAL
<S> <C> <C> <C> <C> <C>
Revenues 1,478,071 390,094 379,193 -- 2,247,358
Inter-segment revenues -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total revenues 1,478,071 390,094 379,193 2,247,358 2,247,358
Income (losses) from operations (3,316,271) (328,117) 112,744 (1,810,532) (5,342,176)
Other income (expense) 90,450 138,119 -- 480,735 709,304
Interest expenses (60,233) (4,603) (75,382) (3,533,834) (3,674,052)
Other financial income (expense), (2,479,318) 23,012 -- (359,753) (2,816,059)
net
Equity in net losses of affiliates -- -- 26,788 (116,565) (89,777)
Loss in discontinued business -- -- -- (48,557) (48,557)
Income tax benefit 3,695 (430) -- -- 3,265
----------- ----------- ----------- ----------- -----------
Net loss (5,761,677) (172,019) 64,150 (5,388,506) (11,258,052)
=========== =========== =========== =========== ===========
Total assets 1,457,077 2,196,476 653,744 1,214,628 5,521,925
=========== =========== =========== =========== ===========
Capital expenditure 731,122 -- -- -- 731,122
=========== =========== =========== =========== ===========
Depreciation of fixed assets 240,818 35,088 37,894 9,712 323,512
=========== =========== =========== =========== ===========
</TABLE>
20
<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, 1999 (the "Form 10-KSB").
Results of Operations
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Operating revenues for the nine months ended September 30, 2000 were $2,136,509,
a decrease of $110,849 compared to operating revenues of $2,247,358 for the same
period in 1999.
Revenues at Onyx Television in the nine month period ended September 30, 2000
totaled $1,563,917, compared to $1,478,071 for the same period of 1999, an
increase of 5.8%. Onyx management believes that the ongoing changes in the Onyx
programming grid, including the improvement of the content quality resulting
from its content deal with Kinowelt, combined with an ongoing alliance strategy
with media companies and cable operators, should contribute to further increase
its network distribution and revenue opportunity and that, although there can be
no assurance, Onyx should be able to further increase the development of its
revenue over the next six months.
Onyx plans to further increase its technical reach in Germany during the first
and second quarters of 2000. At the present time, Onyx Television reaches
approximately 11.5 million cable homes and an indeterminable number of direct
satellite homes in Germany, previously estimated at 2.5 million. See the
information contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999.
Operating costs, including staff costs, depreciation and amortization, totaled
$9,398,118 for nine months ended September 30, 2000, compared to $7,589,534
million for the nine month period ending September 30, 1999. The increase in
operating costs were primarily at Onyx.
Depreciation and amortization for the nine months ended September 30, 2000 was
$713,374 compared to $770,048 for the nine month period ended September 30,
1999. The decrease of $1,507,046 million in financial expense relates primarily
to lower levels of debt. Financial expense for the nine months ended September
30, 2000 was $1,959,571 compared to $6,490,111 for the same period in 1999.
Financial expense for the nine months ended September 30, 2000 was $1,959,571
(including an exchange loss of $1,409,571), compared to $6,490,111 for the same
period in 1999, thus showing a decrease of $4,530,540.
As a result of all of the above factors, the Company reported a loss from
continuing operations of $8,805,951 for nine months ended September 30, 2000, a
decrease of $2,452,101 from $11,258,052 for the same period in 1999.
The net loss per share for the nine months ended September 30, 2000 (basic and
diluted) was $0.31, compared to a net loss per share (basic and diluted) of
$2.80 for the nine months ended September 30, 1999. Weighted average shares
outstanding basic and diluted were 29,864,362 for the nine months ended
September 30, 2000 compared to 4,009,413 for the corresponding period in 1999.
As described in the Notes to the Financial Statements, a Stockholder's Meeting
was held on October 22, 1999, wherein it was resolved to effect a reverse split
of the Company's authorized capital on a one new share for ten existing shares.
Consequently the authorized capital of the Company remains at 50,000,000 shares
of common stock. Accordingly all references to the Company's shares of Common
Stock are on a post split basis.
21
<PAGE>
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Operating revenues for the three months ended September 30, 2000 were $573,067,
a decrease of $209,935 over the same period in 1999. Operating costs, including
staff costs, depreciation and amortization totaled $2,990,919 for the three
months ended September 30, 2000, compared to $2,462,790 for the three months
ended September 30, 1999, the small increase in operating costs being primarily
at Onyx.
Depreciation and amortization for the three months ended September 30, 2000 was
$225,603 compared to $277,579 for 1999.
The decrease in financial expense relates primarily to the substantial reduction
of the consolidated indebtedness and to foreign exchange profits which arise
from the decision taken in September 2000 that would allow CMG Limited to both
recapitalize ONYX and allow the repayment of loans granted by CM(UK) to Onyx.
The exchange rates upon repayment of the debts were contractually fixed as of
January 1, 2000 resulting in a reversal of some of the exchanges losses already
recorded. These inter-company loans were effectively reimbursed in October 2000.
The Company's operations in France, including TopCard, reported a profit of
$45,742 for the three months ended September 30, 2000, compared to a profit of
$111,735 for the same period in 1999. Topcard activity in the first three
quarters of 2000 has been primarily to test and complete new developments.
Operations in Israel, including Pixel, reported a profit of $41,549, for
September 30, 2000, compared to a profit of $8,825 for the three months ended
September 30, 1999.
The net loss per share for the three months ended September 30, 2000 (basic and
diluted) was $0.08, compared to a net loss per share (basic and diluted) of
$0.36 for the three months ended September 30, 1999. Weighted average shares
outstanding basic and diluted were 30,780,473 for the three months ended
September 30, 2000 compared to 4,009,413 for the corresponding period in 1999.
Financial Condition. Liquidity and Capital Resources
General
The ownership, development and operation of media interests, and
particularly the operation of a television station, requires substantial capital
investment. To date, we have financed our capital requirements through sales of
our equity securities and through debt financing. Since inception through
September 30, 2000, we have incurred an accumulated deficit of approximately
$71,669,001, principally related to the launch and operation of Onyx Television.
At September 30, 2000, we had a negative working capital of $5,088,585.
22
<PAGE>
Equity Offerings by Capital Media
For a description of all equity offerings prior to December 31, 1999,
see the Company's Annual Report on Form 10-KSB for the year ended December 31,
1999.
In January 2000, AB Groupe made a loan to the Company of $500,000 for
general working capital purposes. The loan is due in two years and bears
interest at the rate of ten percent (10%) per year. In connection with the loan,
the Company granted AB Groupe a two year warrant to purchase 500,000 shares of
Common Stock at the exercise price of $1.00 per share.
In January 2000, AB Groupe and Superstar made loans to the Company in
the aggregate of $1,000,000. The proceeds were in part used to increase the
capital investments in Onyx by $465,000 and Topcard by $225,000. The loan is due
in two years and accrues interest at the rate of ten percent (10%) per year. In
connection with the loan, the Company granted AB Groupe and Superstar a two year
warrant to purchase 1,000,000 shares of the Common Stock at an exercise price of
$1.00 per share.
In March 2000, AB Groupe loaned the Company an additional $1,000,000
for working capital. The loan is due in two years with interest of ten percent
(10%) per annum. In connection with the loan, we granted AB Groupe a two year
warrant to purchase 1,000,000 shares of common stock at an exercise price of
$1.00 per share.
In March 2000, the Company granted management the right to purchase up
to 6.5 million shares, on or before December 31, 2000, as detailed below:
Gilles Michel Jean-Francois
Purchase Price Assouline Assouline Klein David Ho Total
$1 per share 750,000 1,100,000 750,000 750,000 3,350,000
$1.50 per share 250,000 300,000 250,000 250,000 1,050,000
$2 per share 250,000 300,000 250,000 250,000 1,050,000
$2.50 per share 250,000 300,000 250,000 250,000 1,050,000
--------- --------- --------- --------- ---------
Total 1,500,000 2,000,000 1,500,000 1,500,000 6,500,000
========= ========= ========= ========= =========
The terms and conditions of this proposed share issuance were
recommended by the audit committee on March 17, 2000. In concluding this price
to be the fair value for the shares, the audit committee took into consideration
the level of funding of the Company required until the end of 2000 and the poor
level of trading activity of the Company's shares on the market (making, in
their view, the market price of the Common Stock unreliable as a factor in
determining value). The audit committee further considered the placement of new
issued shares under similar terms and conditions in favor of the non-affiliate
shareholders of the Company and recommended this be done in the future. The
Board intends that such a placement will be proposed during the next
shareholder's meeting.
The Board held April 21, 2000 authorized the issue of up to 500,000
shares to each Group AB and Superstar at $1.50 each prior to the end of July
2000. Out of these, 780,000 shares were effectively issued and paid. Groupe AB
and Superstar purchased 480,000 new shares and 300,000 shares respectively, out
of which an aggregate number of 280,000 shares were effectively subscribed prior
to June 30, 2000 and 500,000 shares were effectively subscribed in July 2000.
In May 2000, the Board proposed to issue 1,000,000 Company shares to
Roger Orf at a purchase price of $2.50 per share prior to July 31, 2000. Roger
Orf did not purchase these shares.
In September 2000, Superstar exercised 650,000 warrants and 650,000
shares of Common Stock were issued by the Company to Superstar.
23
<PAGE>
In October 2000, FA Television Holdings LLC, a joint venture company
between Allied Capital, Gilles Assouline and Michel Assouline, subscribed to
purchase 480,000 shares at $1.50 per share and 120,000 shares at $1.00 per share
out of the shares subscription granted to management in March 2000. In October
2000, 600,000 new shares were issued to FA Television Holdings LLC, for an
aggregate purchase price of $840,000.
Liquidity and Capital Resources
The Company believes that additional capital will be required, along
with anticipated revenues from operations, to fund operations for the next 12
months. The Company anticipates that the required fundings will be made
available by AB Groupe or David Ho, or from other sources, although there can be
no assurance that the necessary funding will become available. Further, required
amounts of funding will be impacted in part by the level of revenues achieved,
particularly at Onyx Television. The Company will likely issue additional shares
of Common Stock, or shares of the capital stock of its subsidiaries, to meet
capital requirements.
Recent Developments
Appointments
Roger Orf was named to the Company's board of directors in April 2000.
Jean-Francois Klein, a director of the Company, has become the
Company's Chief Financial Officer. Mr. Klein is also the chief financial officer
of AB Groupe.
Licenses
In late 1999, Onyx Television GmbH and AB Groupe were granted by the
German Media authorities a license to broadcast twelve additional digital
channels. In June 2000, AB Groupe and ONYX co-founded ONYX Plus GmbH, a 50/50
joint venture dedicated to the production and distribution of the 12 digital
channels. ONYX Plus has signed two contracts with German cable-operators for the
distribution of certain of the licensed channels. The first transmission of
these digital channels is planned to start on March 1, 2001.
Internet
In June 2000, Onyx launched its portal site, --ONYXNet-- - accessible
on the world Wide Web at www.onyx.tv - and offered a subscription-free internet
access through the Mannesman Arcor backbone. ONYXNet portal site combines
background information on the Onyx channel together with information of general
interest (weather reports, news, financial news, movie releases, etc.), personal
services (E-mail, SMS messages, discussion forums, etc.) and shopping. As of
September 2000, ONYXNet had received over six million hits and over 1 million
pages were being viewed on a monthly basis.
Analogue free TV
In September 2000, ONYX Television GmbH entered into a Content
Agreement with Kinowelt Medien AG. Kinowelt is a Munich based company, listed on
the Frankfurt Neuer Market, having core activities related to the film industry,
including the production of movies, acquisition and distribution of television
rights, ownership and exploitation of cinema multiplexes, manufacturing and
distribution of videos and DVDs. Kinowelt is currently exploiting a large
library of long feature films, TV series and Digital TV programming, including
premiere movies from Warner, such as "The Matrix", "The Fugitive" or "Wild Wild
West".
24
<PAGE>
Pursuant to this Content Agreement, ONYX currently broadcasts Kinowelt
movies at prime time (from 8:15 PM to 10:30 PM) on a daily basis. ONYX and
Kinowelt shall share revenues generated through the advertising spots aired
during these prime time slots.
The agreement with Kinowelt is valid until the end of September 2001.
At the end of September 2000, Onyx had a technical reach of almost 11.5
million cable households in Germany and an indeterminable number of direct
satellite homes previously estimated at 2.5 million in Germany. Therefore, Onyx
presently is believed to have a technical reach to almost 14 million households
in Europe.
Capital Increase of TopCard Monetique SA
During an Extraordinary Meeting held on March 3, 2000, Topcard's
stockholders approved an increase in the capital stock of TopCard by up to 6
million French Francs through the issuance of 60,000 new shares of par value 100
French Francs, payable either in cash or by compensation of existing loans.
Subscription rights to purchase 7.46 shares of TopCard were attached to each
existing share. Unimedia exercised all its subscription rights and subscribed
53,982 new issued shares for a total purchase price of 5,398,200 French Francs.
Unimedia now holds 61,215 TopCard shares, representing 98.66% of the
capital stock of TopCard.
Capital Increase of Unimedia SA
During an Extraordinary Meeting held on June 26, 2000, Unimedia's
stockholders decided to increase the capital stock of Unimedia by up to
12,302,000 million French Francs through the issuance of 123,020 new shares of
par value 100 French Francs, payable either in cash or by compensation of
existing loans. A subscription right to purchase an additional Unimedia was
attached to each existing share. The Company exercised all its subscription
rights and subscribed 123,020 new issued shares for a total purchase price of
12,302,000 French Francs. The Company now holds 133,058 Unimedia shares
representing 98.33% of the capital stock of Unimedia.
Capital Increase of Onyx Television GmbH
In a meeting held on September 25, 2000, the Board authorized 38.9
Million Euro capital injection into Onyx to be fully paid by the Company. In
October 2000, 36.5 Million Euros were wired by the Company into the Capital
reserve of Onyx GmbH and 2.4 Million Euros of new Onyx shares were subscribed by
the Company. These funds were borrowed from AB Groupe.
After this capital increase, the Company now directly holds 66.67% of
Onyx, while its wholly owned subsidiary, CM(UK), continues to own 33.33% of
Onyx.
Onyx used the proceeds of this capital infusal to settle substantially
all of its outstanding debt, including its outstanding debt to CM (UK). CM (UK),
in turn, used a substantial portion of these proceeds to repay its intercompany
loans due to the Company reducing CM (UK)'s indebtedness by more than 80%.
25
<PAGE>
PART 2
Item 1. Legal Proceedings
For information regarding the status of the Company's currently
outstanding litigation, see Note 9 of Notes to Unaudited Consolidated
Financial Statements included herein and Item 3. "Legal Proceedings" in
the Company's 1999 Form 10-KSB.
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
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Financial Data Schedule
(b) Reports on Form 8-K
None
26
<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 5th day of December, 2000.
CAPITAL MEDIA GROUP LIMITED
By: /s/ Gilles Assouline
------------------------------------
Gilles Assouline, President and
Chief Executive Officer
By: /s/ Jean-Francois Klein
------------------------------------
Jean-Francois Klein,
Chief Financial Officer
27
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
27.1 Financial Data Schedule
