<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of
1934
For the quarterly period ended July 31, 1997
-------------
Commission file number 0-19997
-------
UC TELEVISION NETWORK CORP.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3557317
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
909 Third Avenue, New York, NY 10022
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 980-6600
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
Number of shares of common stock outstanding as of September 9, 1997:
40,075,766
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
<TABLE>
<CAPTION>
UC TELEVISION NETWORK CORP.
BALANCE SHEET
July 31, 1997
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents............................... $ 15,134,920
Short-term investments.................................. 45,877
Accounts receivable..................................... 473,483
Prepaid expenses........................................ 35,275
Other current assets.................................... 21,956
------------
Total current assets............................. 15,711,511
Property and equipment, net................................ 1,741,257
Other assets............................................... 13,258
------------
TOTAL............................................ $ 17,466,026
============
LIABILITIES
Current liabilities:
Current portion of obligations under capital leases.... $ 107,866
Accounts payable and accrued expenses.................. 659,121
Dividends payable...................................... 2,168
Total current liabilities............................. 769,155
------------
Obligations under capital leases........................... 119,218
------------
Redeemable preferred stock................................. 3,333
------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Capital stock:
Preferred stock - $.001 par; authorized
500,000 shares; none issued
Common stock - $.001 par; authorized 100,000,000 shares;
issued and outstanding 40,075,766 shares.............. 40,076
Additional paid in capital................................. 30,241,844
Accumulated deficit....................................... (13,707,600)
------------
Total stockholders' equity....................... 16,574,320
------------
TOTAL............................................ $ 17,466,026
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UC TELEVISION NETWORK CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended Ended
July 31, July 31,
--------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales...............................$ 149,083 $ 77,000 $ 1,810,508 $ 1,196,213
----------- ----------- ----------- -----------
Cost of sales....................... 561,111 294,792 1,466,157 972,162
Selling, general and administrative. 1,132,374 741,532 2,563,413 2,096,885
Interest expense.................... 948 7,634
Interest income..................... (206,136) (31,925) (236,305) (42,911)
----------- ----------- ----------- -----------
1,488,297 1,004,399 3,800,899 3,026,136
----------- ----------- ----------- -----------
NET LOSS............................$(1,339,214) $ (927,399) $(1,990,391) $(1,829,923)
=========== =========== =========== ===========
Loss per share...................... $(0.03) $(0.09) $(0.09) $(0.25)
Weighted average number of
common shares outstanding....... 40,075,766 10,327,416 21,214,290 7,472,029
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
UC TELEVISION NETWORK CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31,
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................$(1,990,391) $(1,829,923)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization................................... 589,435 299,445
Write down of certain entertainment equipment................... 34,705
Changes in operating assets and liabilities:
Decrease in accounts receivable............................... 288,313 464,396
Decrease in prepaid expenses and other current assets......... 56,049 66,295
Decrease (increase) in other assets........................... (9,644) 8,092
Increase (decrease) in accounts payable and accrued expenses.. 125,660 (23,466)
----------- -----------
Net cash used in operating activities....................... (940,578) (980,456)
----------- -----------
Cash flows used in investing activities:
Purchases of property and equipment................................. (689,236) (240,016)
Proceeds from sale of obsolete components........................... 309,408
Purchases of short-term investments................................. (45,877)
----------- -----------
Net cash provided by (used in) investing activities......... (735,113) 69,392
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock.......................... 15,424,789 2,974,989
Increase in capitalized lease obligations........................... 227,084
----------- -----------
Net cash provided by financing activities................... 15,651,873 2,974,989
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............................. 13,976,182 2,063,925
Cash - beginning of period............................................. 1,158,738 792,424
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD..............................$15,134,920 $ 2,856,349
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
UC TELEVISION NETWORK CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the Company's financial statements for the fiscal year ended October 31,
1996 included in the Annual Report as filed on Form 10-KSB with the United
States Securities and Exchange Commission.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
The results of operations for the nine months ended July 31, 1997 are not
necessarily indicative of the results of operations for the full fiscal year
ending October 31, 1997.
NOTE (A) - The Company:
- ----------------------
UC Television Network Corp. ("the Company") is a broadcasting company which
owns and operates the College Television Network ("CTN"), a proprietary
interactive commercial television network operating on college and university
campuses, through single-channel television systems placed primarily in campus
dining facilities and student unions. Substantially all of the Company's
revenues are derived from advertising displayed on CTN. At July 31, 1997, CTN
was installed or contracted for installation at approximately 250 locations in
various colleges and universities throughout the United States.
The Company's revenues are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its revenues during the period of September through May
and substantially less revenues during the summer months when colleges and
universities do not hold regular classes.
NOTE (B) - Private Placement:
- ----------------------------
Pursuant to the terms of a purchase agreement dated as of April 25, 1997
between the Company and U-C Holdings, L.L.C., a Delaware limited liability
company (the "Purchaser"), for an aggregate purchase price, net of issuance
costs, of $15,424,789, the Company issued to the Purchaser 29,090,909 shares of
Common Stock and a Class C Warrant to purchase 3,863,662 shares of Common Stock
for $.55 per share. In addition, the Company and the Purchaser entered into
certain equity protection agreements to protect the Purchaser's percentage
ownership interest in the Company from dilution from third party exercises of
outstanding warrants and options to acquire the Company's Common Stock. Such
agreements provide the purchaser with the right to acquire additional shares of
the Company's Common Stock.
<PAGE>
NOTE (C) - Commitments and Contingencies:
- ----------------------------------------
On July 1, 1997, the Company entered into an agreement with 360, Inc. to
develop and execute marketing and promotional programs for the Company. The
initial term of the agreement is one year with fees aggregating $390,000 during
that period. After the initial term, the agreement will continue on a month-to-
month basis and may be canceled by either party upon 60 days written notice.
The Company executed an equipment rental agreement with Hughes Network
Systems on November 6, 1996. The agreement calls for the installation of 200
systems for receiving satellite transmissions with payments aggregating $328,032
over a three year period. At the end of such period, the Company may purchase
the equipment for $1.00. A total of $227,084 has been classified as capital
lease obligations, representing equipment placed into service through July 31,
1997.
In connection with the acquisition of certain assets, the Company agreed to
pay two former shareholders of the seller an aggregate of $100,000, one-half
being payable at such time the Company's net pre-tax income equals at least
$500,000, and the balance being payable at such time as the Company has an
additional $500,000 in net pre-tax earnings.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's financial statements appearing elsewhere in this report. Information
contained or incorporated by reference in this report contains "forward looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. No assurance can be given that the future results
covered by the forward-looking statements will be achieved.
RESULTS OF OPERATION
The Company is a broadcasting company whose principal activities involve
operating and marketing CTN, a private commercial television network. At July
31, 1997, CTN was installed or contracted for installation at approximately 250
locations in various colleges and universities throughout the United States.
Substantially all of its revenues are derived from advertising displayed on CTN.
The Company's revenues are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its revenues during the period of September through May
and substantially less revenues during the summer months when colleges and
universities do not hold regular classes.
The following table sets forth certain financial data derived from the
Company's statement of operations for the three and nine months ended July 31,
1997 and July 31, 1996:
<TABLE>
<CAPTION>
Three Months Ended
-------------------
July 31, 1997 July 31, 1996
--------------------- ----------------------
$ $
--------------------- ----------------------
<S> <C> <C>
Sales............................... 149,083 $ 77,000
Cost of sales....................... 561,111 294,792
Selling, general and administrative 1,132,374 741,532
.
Interest expense.................... 948 -
Interest income..................... 206,136 31,925
Net loss............................ 1,339,214 927,399
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
July 31, 1997 July 31, 1996
---------------------------- ----------------------------
% of % of
$ Sales $ Sales
---------------- --------- ----------------------------
<S> <C> <C> <C> <C>
Sales............................... 1,810,508 100% 1,196,213 100%
Cost of sales....................... 1,466,157 81 972,162 81
Selling, general and administrative 2,563,413 142 2,096,885 175
.
Interest expense.................... 7,634 - - -
Interest income..................... 236,305 13 42,911 3
Net loss............................ 1,990,391 110 1,829,923 153
</TABLE>
<PAGE>
Sales increased to $149,083 and $1,810,508 for the three and nine-month
periods ended July 31, 1997, respectively, versus $77,000 and $1,196,213 for the
comparable periods last year. Increased commitments from existing customers
combined with new customers were the primary sources of this increase. The
Company anticipates continued sales growth during the year ending October 31,
1997 ("Fiscal 1997"), with advertising commitments for Fiscal 1997 as of August
31, 1997 at approximately 50 percent above commitments for Fiscal 1996 at the
same date last year.
The cost of sales increased to $561,111 and $1,466,157 for the three and nine-
month periods ended July 31, 1997, respectively, from $294,792 and $972,162 for
the comparable periods last year. The increase over the prior year is primarily
attributed to increased depreciation expense relating to the retrofit of
existing systems to utilize satellite transmission technology and preventative
maintenance performed at all sites during the summer of 1997. Additional
programming costs were also incurred during Fiscal 1997 with the commencement of
news and sports programming provided by Turner Private Networks, Inc. in April
1997.
Selling, general and administrative expenses increased to $1,132,374 and
$2,563,413 for the three and nine-month periods ended July 31, 1997,
respectively, as compared to $741,532 and $2,096,885 for the comparable periods
last year. The Company has added additional personnel during the three month
period ended July 31, 1997 as part of its effort to increase its network and
advertiser base. A significant portion of the increase in selling, general and
administrative expenses for the three and nine month periods ended July 31, 1997
was related to additional payroll, benefits and other associated expenditures as
a result of the increase in employees. In addition, fees and commissions based
on a percentage of sales, generally paid to agencies representing advertisers on
CTN, increased during the three and nine month periods ended July 31, 1997.
These increases were directly attributed to increased sales over the same
periods.
Interest expense related to an equipment rental agreement with Hughes Network
Systems totaled $948 for the 3rd Quarter 1997 and $7,634 for the nine months
ended July 31, 1997. Interest income increased to $206,136 and $236,305 for the
three and nine-month periods ended July 31, 1997, respectively, as compared to
$31,925 and $42,911 for the comparable periods last year. The increase is
related to proceeds from the private placement described below.
The net loss increased to $1,339,214 and $1,990,391 for the three and nine-
month periods ended July 31, 1997, up from $927,399 and $1,829,923 for the
comparable periods last year. The Company has incurred substantial losses since
commencement of its operations and anticipates that such losses will continue in
Fiscal 1997. In order to reach the stage where the Company is profitable, the
Company will need to continue to expand into additional college dining
facilities. The Company plans to use the proceeds of the private placement
described below to expand its network and advertiser base. To achieve these
objectives, the Company has added additional personnel and expects to incur
additional costs for expanded marketing efforts, improved programming and
equipment for new locations in advance of recognizing additional revenues.
Management anticipates the financial results to be impacted by these additional
expenditures through at least the end of the current fiscal year.
FINANCIAL CONDITION AND LIQUIDITY
At July 31, 1997, the Company had working capital of $14,942,356. At such
date, the Company's cash and cash equivalents totaled $15,134,920.
Cash used in operations decreased to $940,578 during the nine months ended
July 31, 1997 from $980,456 for the comparable period last year. The impact of
increased sales during the nine month period ended July 31, 1997 was
substantially offset by additional expenditures related to personnel added as
part of the Company's effort to expand its network and advertiser base.
<PAGE>
Purchases of property and equipment increased to $689,236 during the nine
months ended July 31, 1997 from $240,016 for the comparable period last year due
to the ongoing conversion of CTN to a satellite delivered network.
The Company executed an equipment rental agreement with Hughes Network
Systems on November 6, 1996. The agreement calls for the installation of 200
systems for receiving satellite transmissions with payments aggregating $328,032
over a three year period. At the end of such period, the Company may purchase
the equipment for $1.00. A total of $227,084 has been classified as capital
lease obligations, representing equipment placed into service through July 31,
1997.
Pursuant to the terms of a purchase agreement dated as of April 25, 1997
between the Company and U-C Holdings, L.L.C., a Delaware limited liability
company (the "Purchaser"), for an aggregate purchase price of $16,200,000, the
Company issued to the Purchaser 29,090,909 shares of Common Stock and a Class C
Warrant to purchase 3,863,662 shares of Common Stock for $.55 per share. In
addition, the Company and the Purchaser entered into certain equity protection
agreements to protect the Purchaser's percentage ownership interest in the
Company from dilution from third party exercises of outstanding warrants and
options to acquire the Company's Common Stock. Such agreements provide the
purchaser with the right to acquire additional shares of the Company's Common
Stock. The net proceeds of this private placement of $15,424,789 is expected to
be used, among other things, to expand the network and the advertiser base by
adding additional personnel, improving the programming shown on the network and
acquiring additional equipment for new locations. Management believes that this
private placement will be sufficient to finance the planned expansion, however
there is no assurance that the Company will achieve its anticipated revenue
levels or profitability.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
By written consent on May 12, 1997 by U-C Holdings, L.L.C., the
majority stockholder which holds 29,090,909 Common Stock of the
Company, the Company has adopted an amendment to its certificate of
incorporation to increase its authorized Common Stock from 50,000,000
shares to 100,000,000 shares. The Company mailed a Schedule 14C
Information Statement to all shareholders on or about May 12, 1997 in
connection with such action.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No. 10 - Certificate of Amendment to Certificate of
Incorporation of UC Television Network Corp.
Exhibit No. 27 - Financial Data Schedule
(b) A report on Form 8-K dated June 24, 1997 disclosed a change in
the Company's independent accountants, the appointment of two
additional members to the Board of Directors of the Company and
a change in the fiscal year of the Company from October 31 to
December 31. No other reports on Form 8-K have been filed for
the quarter for which this report is being filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UC TELEVISION NETWORK CORP.
Registrant
Date: September 12, 1997 /s/ Jason Elkin
--------------------------------------
Jason Elkin
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: September 12, 1997 /s/ Alan Pearl
--------------------------------------
Alan Pearl
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting
and Financial Officer)
<PAGE>
EXHIBIT 10
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
UC TELEVISION NETWORK CORP.
UC Television Network Corp., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), pursuant to the provisions of
the General Corporation Law of the State of Delaware, does hereby certify as
follows:
1.
The Certification of Incorporation is hereby amended by deleting in its
entirety the first paragraph of Article Four of the Certificate of Incorporation
in its present from and substituting in lieu thereof a new first paragraph of
Article Four in the following form:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issues is One Hundred Two Million
(102,000,000) shares, of which, One Hundred Million (100,000,000) shares
shall be Common Stock, par value $0.001, and Two Million (2,000,000)
shares will be Preferred Stock, par value $0.001 per share."
The amendment to the Certificate of Incorporation set forth in this
Certificate of Amendment has been duty adopted in accordance with the applicable
provisions of Section 242 of the General; Corporation Law of the State of
Delaware, (a) in lieu of a meeting and vote of directors, all of the directors
having duly consented in writing to the adoption of such amendment, and (b) in
lieu of a meeting and vote of the shareholders, the holders of a majority of the
common stock of the Corporation who would have been entitled to vote upon such
amendment if a meeting of shareholders were called and held having duty
consented in writing to the adoption of such amendment.
IN WITNESS WHEREOF, the undersigned, fully authorized officer of the
Corporation, has executed this Certificate of Amendment and does hereby declare
and certify, under the penalties of perjury, that this is his act and deed and
the facts herein are true, as of this 15th day of May, 1997.
UC TELEVISION NETWORK CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS CONTAINED IN THE JULY 31, 1997 QUARTERLY REPORT FILED ON
ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 15,134,920
<SECURITIES> 45,877
<RECEIVABLES> 482,483
<ALLOWANCES> (9,000)
<INVENTORY> 0
<CURRENT-ASSETS> 15,711,511
<PP&E> 4,151,853
<DEPRECIATION> (2,410,596)
<TOTAL-ASSETS> 17,466,026
<CURRENT-LIABILITIES> 769,155
<BONDS> 0
0
3,333
<COMMON> 40,076
<OTHER-SE> 16,534,244
<TOTAL-LIABILITY-AND-EQUITY> 17,466,026
<SALES> 1,810,508
<TOTAL-REVENUES> 1,810,508
<CGS> 1,466,157
<TOTAL-COSTS> 1,466,157
<OTHER-EXPENSES> 2,554,413
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 7,634
<INCOME-PRETAX> (1,990,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,990,391)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
