<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive information statement
UC TELEVISION NETWORK CORP.
---------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-c5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(6) Amount Previously Paid:
(7) Form, Schedule or Registration Statement No.:
(8) Filing Party: UC Television Network Corp.
(9) Date Filed: May 1, 1997
<PAGE>
UC TELEVISION NETWORK CORP.
645 Fifth Avenue
East Wing
New York, New York 10022
MAY 1, 1997
PRELIMINARY INFORMATION STATEMENT
This Information Statement is being mailed to the stockholders of UC
Television Network Corp. (the "Company") commencing on or about May 12, 1997, in
connection with the previous approval by the board of directors of the Company
of the corporate actions referred to below and their subsequent adoption by the
majority stockholder of the Company. Accordingly, all necessary corporate
approvals in connection with the matters referred to herein have been obtained,
and this Information Statement is furnished solely for the purpose of informing
stockholders, in the manner required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), of these corporate actions before they take
effect. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
ACTIONS TAKEN
The Company, as authorized by the necessary approvals of the board of
directors and the Company's majority stockholder, has approved the adoption of
an amendment (the "Amendment") to the Company's Certificate of Incorporation, as
amended, to increase the authorized common stock, par value $.001 per share
("Common Stock"), of the Company from 50,000,000 shares to 100,000,000 shares.
A copy of the Amendment is attached hereto as Exhibit A. The Amendment was
adopted in connection with the recent purchase by U-C Holdings, L.L.C., a
Delaware limited liability company ("U-C Holdings") of 29,090,909 shares of
Common Stock and a warrant to purchase an additional 3,863,662 shares of Common
Stock as well as the execution of certain Equity Protection Agreements
(collectively, the "Purchased Securities") pursuant to that certain Purchase
Agreement, dated as of April 25, 1997, between the Company and U-C Holdings (the
"Purchase Agreement"). The purchase of Common Stock by U-C Holdings pursuant to
the Purchase Agreement was described in the Information Statement pursuant to
Section 14(f) of the Exchange Act (the "14F-1 Information Statement") which was
mailed to the stockholders of the Company on May 1, 1997. The majority
stockholder consent with respect to the Amendment was executed on May ____, 1997
and will take effect 20 days after the mailing of this Information Statement or
on such other date as may be specified by the board of directors. A complete
summary of this matter is set forth herein.
NO DISSENTERS' RIGHTS
The corporate action described in this Information Statement will not
afford to stockholders the opportunity to dissent from the action described
herein and to receive an agreed or judicially appraised value for their shares.
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THE AMENDMENT
PURPOSE OF THE AMENDMENT; EFFECT ON STOCKHOLDERS
The Company has adopted the Amendment to increase its authorized Common
Stock from 50,000,000 shares to 100,000,000 shares. The increase in authorized
Common Stock will provide the Company sufficient authorized Common Stock (i) for
reserving for issuance to U-C Holdings upon the exercise of the purchase rights
under the Equity Protection Agreements and the warrant purchased pursuant to the
Purchase Agreement, (ii) to increase the Company's reserve for issuance to other
holders of options and warrants to purchase Common Stock outstanding on the date
hereof or granted in the future upon exercise of such options and warrants, and
(iii) for issuance in connection with any future financing activities or
corporate acquisitions using the Company's Common Stock. As of April 25, 1997,
the Company had 40,075,766 shares of Common Stock outstanding and had
outstanding warrants and options to purchase 15,974,181 shares of Common Stock.
On the date of closing of the purchase by U-C Holdings of the Purchased
Securities pursuant to the Purchase Agreement, U-C Holdings placed the Purchased
Securities in escrow (as described in the 14F-1 Information Statement) pending
satisfaction of certain escrow conditions. Peter Kauff, an executive officer of
the Company and a holder of options to purchase 1,799,958 shares of Common
Stock, has agreed not to exercise his options until the effectiveness of the
Amendment, and has agreed to waive the requirement that a sufficient number of
shares of Common Stock be authorized and reserved for issuance upon exercise of
his options until the effectiveness of the Amendment.
The Company has taken all action required under Delaware law to approve the
Amendment; however, since stockholder approval of the Amendment was obtained by
written consent rather than at a stockholders' meeting, the Exchange Act will
not permit the Amendment to become effective until the expiration of 20 calendar
days from the date hereof. Upon the expiration of such 20 day period, the
Company will file the Amendment with the Delaware Secretary of State and
Mr. Kauff's right to exercise his options will be reinstated.
The Company believes that the Amendment will not have any effect on its
business and operations, and expects to continue such business and operations as
they are currently being conducted. As a result of the issuance of the Purchased
Securities to U-C Holdings pursuant to the Purchase Agreement, the Company's
assets have increased by the purchase price paid by U-C Holdings and the other
stockholders of the Company have experienced a decrease in their percentage
stock ownership in the Company.
STOCKHOLDER APPROVAL PREVIOUSLY OBTAINED
The Company has 40,075,766 issued and outstanding shares of Common Stock,
each of which is entitled to one vote on any matter brought to a vote of the
Company's stockholders. U-C Holdings owns 29,090,909 shares, or 72.6%, of all
issued and authorized shares of the Company's Common Stock. By written consent
dated May ___, 1997, U-C Holdings approved the adoption and implementation of
the Amendment by written consent in lieu of a meeting, such consent to take
effect 20 days following the mailing of this Information Statement or on such
other date as may be specified by the board of directors. Such action by
written consent is sufficient to satisfy the applicable requirements of Delaware
law that any amendment of the Company's Certificate of Incorporation be
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<PAGE>
approved by the stockholders. Accordingly, the stockholders will not be asked to
take further action on the Amendment at any future meeting.
MATERIAL INCORPORATED BY REFERENCE
In connection with the change in a majority of the directors of the Company
pursuant to the Purchase Agreement, the Company has filed the 14F-1 Information
Statement with the Commission pursuant to Rule 14(f) of the Exchange Act. The
14F-1 Information Statement is incorporated herein by reference and has been
mailed to each stockholder. The audited balance sheets of the Company as of
October 31, 1996 and 1995 and the related statements of operations, changes in
stockholders' equity and cash flows for the two years ended October 31, 1996,
are incorporated herein by reference to the Company's Annual Report on
Form 10-KSB filed with the SEC for the fiscal year ended October 31, 1996, a
copy of which has been mailed to each stockholder with this Information
Statement. The Company's unaudited consolidated balance sheet as of January 31,
1997, and the related consolidated statements of operations and cash flows for
the three month period ended January 31, 1997, are incorporated herein by
reference to the Company's Quarterly Report on Form 10-QSB filed with the SEC
for the fiscal quarter ended January 31, 1997, a copy of which has been mailed
to each stockholder with this Information Statement.
OTHER MATTERS
The annual report to stockholders covering the year ending October 31, 1996
has been mailed to each stockholder or accompanies this Information Statement.
STATEMENT REQUIRED BY 17 CFR 240.14C-5(C)
The Company intends to release the Definitive Information Statement to
shareholders on Monday, May 12, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto authorized.
Dated: May 1, 1997 UC TELEVISION NETWORK CORP.
By: /s/ Peter Kauff
--------------------------------
Peter Kauff
Chairman of the Board and
Chief Executive Officer
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EXHIBIT A
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 Certificate of Incorporation of the Corporation is hereby amended by
deleting in its entirety the first paragraph of Article Four of the Certificate
of Incorporation in its present form 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 issue 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."
2.
The amendment to the Certificate of Incorporation set forth in this
Certificate of Amendment has been duly 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 duly
consented in writing to the adoption of such amendment.
In witness whereof, the undersigned, a duly 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 ____ day of May, 1997.
UC TELEVISION NETWORK CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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[UC Television Network Corp. Letterhead]
To Our Shareholders:
Fiscal 1996 was a transitional year for our Company. During the year, we
completed the foundation for converting our network to a satellite delivered
system. We have retrofitted all of our systems with more powerful IBM video
servers. Currently, we are completing the installation of satellite dishes at
our affiliates and are in the process of testing satellite transmissions.
During fiscal 1996, we entered into an agreement with Turner Private Networks,
Inc., a division of Turner Broadcasting Systems, Inc., to produce programming,
including news and sports, for our network. We expect the broadcasts of news
and sports, drawn from the resources of CNN, to commence this April. To reflect
our Company's focus, we changed our name to UC Television Network Corp.
We continue to see dramatic improvements in advertising sales. Sales for
fiscal 1996 exceeded $2 million, a 24 percent increase over sales of $1.6
million for fiscal 1995. The net loss for the year decreased to $2,051,000 or
$.25 per share, compared with $2,494,387 or $.44 per share.
Fiscal 1997 is expected to be a very exciting year for the Company. With
the introduction of satellite transmissions to our campus locations, we are able
to provide improved programming to our audience as well as greater flexibility
to our advertisers. We continue to attract new customers, such as Frito-Lay,
Columbia House and Ralph Lauren and are seeing longer commitments from existing
customers such as Discover Card, UPS, Burger King and MasterCard. Sales for the
first quarter of fiscal 1997 increased 70 percent over sales for the same period
last year. Overall, advertising commitments to date for fiscal 1997 are 75
percent above fiscal 1996 as of the same date last year.
With the conversion to a satellite delivered system nearing completion, we
are again focusing on the growth of our network. We expect the expansion of our
network in fiscal 1997 to lay significant groundwork on our road to
profitability.
On behalf of the Board of Directors, I would like to thank our
stockholders, customers and employees for their continued support.
Sincerely,
Peter L. Kauff
Chairman of the Board and
Chief Executive Officer
February 28, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[x] ANNUAL REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No.: 0-19997
UC TELEVISION NETWORK CORP.
(FORMERLY LASER VIDEO NETWORK, INC.)
----------------------------------------------
(Name of small business issuer in its charter)
Delaware 13-3557317
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
645 Fifth Avenue, East Wing, New York, New York 10022
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 888-0617
Securities registered under Section 12(b) of the Exchange Act:
Title of Classes
----------------
Common Stock, $.001 par value
Class A Redeemable Warrants
Class B Redeemable Warrants
Units (consisting of two shares of
Common Stock, one Class A Warrant
and one Class B Warrant)
Securities registered under Section 12(g) of the Exchange Act: NONE
<PAGE>
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 [_]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this Form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $2,016,152
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of January 31, 1997 (computed by reference to the average bid
and asked prices of such stock on January 31, 1997) was approximately
$6,067,405.
There were 10,984,857 shares of Common Stock outstanding at January 31,
1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of Registrant's
definitive proxy statement with respect to its 1997 Annual Meeting of
Stockholders to be filed, pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (the "Exchange Act"), with the Commission within 120 days
of the close of Registrant's fiscal year ended October 31, 1996, are
incorporated by reference into Part III of this report.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
UC Television Network Corp., a Delaware corporation formerly known as Laser
Video Network, Inc. (the "Company"), commenced operations in January 1991. The
Company is a broadcasting company which owns and operates the UC Television
Network ("UCTN"), a proprietary interactive commercial television network
operating on college and university campuses, through single-channel television
systems ("Systems") placed free of charge primarily in campus dining facilities
and student unions. Substantially all of the Company's revenues are derived from
advertising displayed on UCTN. At January 27, 1997 UCTN was installed or
contracted for installtaion at approximately 226 locations at various colleges
and universities throughout the United States. The Company believes UCTN
currently reaches a viewership of approximately 587,000 daily impressions.
The Company believes UCTN to be the largest college and university private
commercial television network in the United States. UCTN is installed in many of
the nation's largest colleges and universities, including among others: Penn
State University, Michigan State University, Arizona State University, UCLA,
Florida State University, Syracuse University, Georgia Tech University, North
Carolina State University, University of Missouri, University of Kentucky,
University of Alabama, Michigan State University and Rutgers University. There
are approximately 3,600 colleges and universities in the United States. The
Company's goal is to place UCTN in a significant number of these institutions.
UCTN, which currently airs primarily music videos, is viewed over 25-inch
television monitors strategically placed throughout the installation site to
provide the highest degree of exposure. Each site is equipped with an
interactive touch screen unit and from three to ten monitors. The System allows
students to select from a wide variety of music videos or to view a pre-set
format. In order to enhance the flexibility and program diversification of UCTN
and to maintain its state-of-the-art appeal, the Company has replaced its
existing CD-ROM technology by converting each System to receive programming
directly through satellite transmission. Satellite delivery of programming is
expected to commence in February 1997. Management believes satellite delivery
will likely result in significant cost savings to the Company and will
facilitate expanded programming opportunities, such as frequent updates of news,
sports and campus current events, in addition to music videos. The Company has
entered into an agreement with Turner Private Networks, Inc. to provide news and
sports programming on UCTN.
<PAGE>
The Company derives its revenues from advertisers displaying their
commercials on UCTN, with the Company presently allotting eight minutes of
advertising available per hour. The Company believes UCTN is well-positioned to
offer advertisers an inexpensive and effective way to reach a highly desirable
audience: 18-25 year old students, with significant disposable income, a
demographic group with proven attractiveness to national advertisers. Each
advertiser's cost per thousand viewers ("CPM") on UCTN is substantially below
that of national advertising in competing media, such as radio, television, MTV,
campus newspapers or campus billboards. National advertisers on UCTN during
fiscal 1996 included Burger King, Coca Cola, Discover Card, Gatorade,
MasterCard, UPS, MGM, Virgin Records, RCA Records, Winter Harvest Records, Fine
Line Pictures, New Line Cinema, Pontiac, Reebok, Twentieth Century Fox,
Universal Pictures, Visa and Warner Brothers. Generally, the Company's mix of
advertisers on CTN changes from time to time. The Company's revenues have grown
from $705,413 in fiscal 1994, to $1,621,465 in fiscal 1995 and to $2,016,152 in
fiscal 1996.
The Company's overall strategy is to expand the number of institutions in
which UCTN is being offered and to expand the number of advertisers. As
additional institutions are added, the Company expects to be able to attract
additional advertisers as well as be able to increase its CPM rate, which is
currently significantly below that of other competing media. If the Company
successfully meets these objectives, advertising revenues should grow
significantly and enhance profitability. The Company also continues to explore
other avenues where its interactive technology can be used (i.e., on-line sales,
Internet sales, couponing and the sale of market research information collected
by the touch screen).
The UC Television Network System
UCTN is a private commercial television network airing the Company's
programming on university and college campuses located throughout the United
States. UCTN is installed in campus public areas such as dining facilities and
student union areas and is designed to serve as background entertainment. The
System is a single channel system offering only UCTN programming, which
currently consists primarily of music videos. UCTN offers an advanced
interactive marketing system which the Company believes is the first "out of
home" network featuring "video on demand." Currently, each UCTN location is
equipped with an interactive touch-screen monitor, a nine gigabyte hard drive, a
Pentium class computer, a phone modem, and high performance speakers. In
addition, three to ten dedicated 25-inch television monitors are strategically
placed throughout the location to maximize the degree of exposure.
In order to more effectively expand its programming to include national
news, local campus news, sports, and comedy on a current
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basis, the Company has determined to switch to the use of satellite
transmission, which the Company anticipates will commence in February 1997. The
Company is in the process of completing the conversion of its entire network to
a Hughes Direct PC satellite-delivered system. Management believes that a
satellite-delivery system offers greater programming flexibility and allows for
more specialized, regional advertising campaigns than its CD-ROM system.
Markets
There are approximately 3,600 colleges and universities in the United
States. The Company's goal is to place UCTN in a significant number of these
institutions. As of January 27, 1997, UCTN was installed or contracted for
installation in 226 locations throughout the country. Included among the
institutions equipped with UCTN are Penn State University, Michigan State
University, Arizona State University, UCLA, Florida State University, Syracuse
University, Georgia Tech University, North Carolina State University, University
of Missouri, University of Kentucky, University of Alabama, Michigan State
University and Rutgers University.
The Company markets its Systems principally to colleges and universities
and to local operators responsible for dining facilities at targeted college or
university campuses. The Company has one full-time employee who is responsible
for marketing the Company's Systems to such institutions and local operators.
Advertising Revenues
The Company derives its revenues from payments by advertisers for spots
played on UCTN. The Company believes advertisers find the network's programming
current and appealing, the campus dining hall setting with its captive audience
desirable, and the System's interactive capability modern and innovative.
UCTN is currently designed to offer sixteen 30-second commercials every
hour. The Company expects that commercials will run on each System for
approximately eight minutes per hour, and the Company is presently charging
$55,000 for a network spot for a 30-second commercial which will run ten times a
day. In both fiscal 1996 and 1995, approximately 33% of the network spots were
sold.
The Company's overall strategy contemplates three principal methods for
increasing its advertising revenue, by(i) increasing audience size by adding
institutions, (ii) increasing the number of advertisers and advertising spots
sold to maximize the use of time available to be sold, (iii) increasing the CPM
rate, which is currently well below that of competing media.
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Advertisers during fiscal 1996 included Burger King, Coca Cola, Discover
Card, Gatorade, MasterCard, UPS, MGM, Virgin Records, RCA Records, Winter
Harvest Records, Fine Line Pictures, New Line Cinema, Pontiac, Reebok, Twentieth
Century Fox, Universal Pictures, Visa and Warner Brothers. VISA, Warner Brothers
and Coca Cola accounted for 22%, 15% and 10%, respectively, of the Company's
sales for fiscal 1996. No other advertiser represented more than 10% of the
Company's sales for fiscal 1996.
Programming Content
UCTN airs short-form entertainment, currently consisting primarily of music
videos. The Company obtains music videos pursuant to written or oral licensing
agreements with a number of the major music company labels which are represented
by Sony, Warner/Electric/Atlantic, EMI, Polygram, MCA and BMG. Each of these
agreements permits the Company to use the music videos for a modest annual fee,
which fee, the Company believes, is not material to either the Company or the
music companies.
On November 5, 1996, the Company entered into a three-year agreement with
Turner Private Networks, Inc. to provide news and sports programming on UCTN
through December 31, 1999 at an aggregate cost of $890,095.
Upgrading, Installation and Maintenance
The Company estimates that it will cost $13,000 to install a System using
the Company's new satellite transmission technology in each new college or
university location. The Company estimates that it will cost approximately
$10,000 per month, plus $10 per location per month, for the Company to transmit
30 minutes of new programming per day (including uplink and downloading).
Maintenance is currently provided by Wang Laboratories, Inc. at an
aggregate cost of approximately $5,000 per month.
Each System is installed, without charge to the institution, at designated
locations agreed upon with the Company. Most of the installations are in the
eastern part of the United States due to the significant number of colleges and
universities located in such geographic area. The Company bears the costs of
normal maintenance and replacement parts.
The Company has obtained liability insurance which generally covers losses
from fire, theft, vandalism and certain other events for each installed System.
The Company pays a premium on a per machine basis and intends to expand coverage
to newly produced machines each quarter. There can be no assurance that such
insurance can be maintained at reasonable rates, or at all. Without such
insurance, significant damage to a number of Systems
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could adversely affect the Company and its financial condition. To date, the
Company has filed only one claim for losses.
Of the 226 Systems contracted for as of January 27, 1997, 212 are presently
installed throughout the United States at college and university campuses. The
remaining Systems are expected to be installed by the start of the fall 1997
semester. System installation generally takes approximately 12 weeks. The
Company is in the process of negotiating with independent third party suppliers
who shall manufacture the equipment housing and assemble the Systems for
approximately $1,200 per System. The Company believes that there are sufficient
number of suppliers available.
The components for each System are generally standard, and the Company
believes, based on its past experience and discussions regarding proposals with
various component part manufacturers and suppliers, that such components will be
available from at least a few different sources. Based on the stated estimated
mean time to failure provided by component part manufacturers and suppliers, the
expected useful life for each System is approximately five years. The warranties
for such components are generally for 12 months.
Competition
UCTN competes for advertisers with many other forms of advertising
targeting the 18-25 year-old market. These competing forms of advertising media
include television, radio, print, direct mail and billboard.
The Company is not aware of any other national television network
specifically directed at college students. However, there is no assurance that
someone with greater resources will not enter into the market, particularly
because there are few proprietary characteristics with the business. The Company
believes it can successfully compete against other forms of media because it
offers an effective means of reaching a difficult to reach targeted audience at
a low cost.
The Company believes that the time required to secure each location is
significant. The Company has already invested a great amount of time in securing
its present locations.
Employees
As of January 27, 1997, the Company employed 14 full-time salaried
personnel, consisting of three management persons, one person responsible for
placement of Systems, three operations persons, five administrative persons and
two advertising salesperson. Although the Company expects to continue to hire
employees to conduct and expand its operations, the Company also expects to use
independent contractors to perform certain of the services required in
connection with the production, installation and maintenance of the Systems. The
responsibilities of the Company's operations and administrative personnel
include
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conducting marketing and promotional activities, managing campus relations, and
performing certain administrative and financial functions. Five of the Company's
employees have employment agreements with the Company. The Company believes that
its relationship with its employees is satisfactory.
Governmental Regulation
Since UCTN is a private network and is not a direct live broadcast, the
Company is not restricted by regulations of the Federal Communications
Commission, network standards and practices or traditional format length and
content restraints. The Company believes that the manner in which it presently
conducts its business operations, and intends to conduct its business
operations, including its licensing arrangements with record companies and
agreements with location owners, is and will be in material compliance with all
applicable laws.
Proprietary Information
The Company believes that certain of its rights to, and uses of, its System
may be protectable under applicable patent, copyright and proprietary
information laws. There can be no assurance as to such fact or that others may
not independently develop the same or similar technology on which the Company's
System is based and thereafter directly compete with the Company. The Company
intends to pursue copyright and trademark registrations as necessary. No
assurance can be given, however, that its obtaining such coverage, even if it
can do so, will afford the Company meaningful protection of any of its
proprietary rights.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company presently has facilities in three locations: New York City,
Boston and Medford, Massachusetts. The New York City facility is the Company's
principal executive office out of which the Company conducts its marketing
efforts, performs certain financial and administrative functions and develops
and maintains campus and sponsor relations. The Boston office is primarily
responsible for the Company's engineering and product development efforts. The
Medford, Massachusetts facility is primarily used for warehousing the Systems
and related spare parts.
The Company currently leases approximately 2,200 square feet of space for
its principal executive office in New York City and approximately 1,000 square
feet of space for its office in Boston. The lease of the space in New York City
terminates in March 1997. If this lease is not renewed, the Company does not
anticipate any problems in finding suitable alternative space. The lease in
Boston terminates in May 1997. In addition, the Company
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leases, on a month-to-month basis, 3,132 square feet of space for its warehouse
facilities in Medford, Massachusetts. The aggregate monthly rental for
these leased offices and facilities is currently approximately $12,435, and the
Company's management believes that these facilities are adequate for its
intended activities in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party, nor to its knowledge threatened to be made a
party, to any litigation or governmental proceeding which its management
believes would, if adversely determined, result in any judgments or fines that
would have a material adverse effect on the Company or its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of fiscal year 1996, no matter was submitted to a
vote of securityholders of the Company.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded and quoted under the symbol UCTN on The
Nasdaq Stock Market's SmallCap Market ("Nasdaq"). The Company's Class A Warrants
are also traded and quoted on Nasdaq under the symbol UCTNW. Prior to delisting,
the Company's IPO Units and Class B Warrants were traded and quoted on Nasdaq
under the symbols LVNIU and UCTNZ, respectively. Each IPO Unit consists of two
shares of Common Stock, one Class A Warrant and one Class B Warrant. Each of the
144,979 outstanding Class A Warrants entitles the holder thereof to purchase 1.3
shares of Common Stock and one Class B Warrant for an aggregate price of $4.60
(subject to adjustment) until June 10, 1997. Each of the 2,270,021 outstanding
Class B Warrants entitles the holder thereof to purchase 1.3 shares of Common
Stock for $6.91 (subject to adjustment) until June 10, 1997. The following table
sets forth the high and low sales prices for the Common Stock, Class A Warrants,
Class B Warrants and IPO Units, as quoted on Nasdaq, for the periods indicated.
Quotations are interdealer prices without retail markup, markdown or commission,
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Common Stock Class A Warrants Class B Warrants/1/ IPO Units/2/
------------------ -------------------- --------------------- ----------------
High Low High Low High Low High Low
---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter ended
January 31, 1995 5-1/4 1-7/8 3-1/4 15/16 1-3/8 7/32 16 4
Quarter ended
April 30, 1995 5-5/16 2-9/16 3-3/4 2-5/8 2-1/2 15/16 17 8
Quarter ended
July 31, 1995 4-1/4 1-11/16 4 1-5/8 3 1-3/8 16 4
Quarter ended
October 31, 1995 2-7/16 31/32 2-1/4 7/8 1-3/8 7/32 6 3-1/2
Quarter ended
January 31, 1996 2-3/32 15/16 1-1/2 3/4 9/16 1/4
Quarter ended
April 30, 1996 1-1/2 15/16 1 3/4 9/32 5/32
Quarter ended
July 31, 1996 1-23/32 1 1 1/2 9/32 1/16
Quarter ended
October 31, 1996 1-9/16 27/32 1/2 1/2 1/8 1/32
</TABLE>
- --------
1 Delisted on January 8, 1997, due to low trading activity.
2 Delisted on August 25, 1995, due to low trading activity.
-8-
<PAGE>
As of January 31, 1997, the Company had 66 owners of record and, it
believes, approximately 1,500 beneficial owners of its Common Stock.
Since its inception, the Company has not paid any cash dividends on its
Common Stock. No dividends may be paid to the holders of Common Stock prior to
payment of dividends by the Company to the holders of its Series A Preferred
Stock. The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to help finance the operations and
expansion of the Company and accordingly does not plan, for the reasonably
foreseeable future, to pay cash dividends to holders of the Common Stock. Any
decisions as to the future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Company's Board
of Directors deem relevant.
ITEM 6. 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, beginning on page F-1, included elsewhere in
this report.
Results of Operations
The Company is an interactive multimedia company whose principal activities
involve operating and marketing UCTN, a private commercial television network.
As of January 27, 1997, UCTN was installed or contracted for installation in 226
locations in colleges and universities throughout the United States.
Substantially all of its revenues are derived from advertising displayed on
UCTN. The Company started operations in January 1991.
In order to utilize satellite transmission technology as a means of
updating its programming on UCTN, the Company retrofitted its existing Systems
installed at college and university campuses during the summer months of 1996.
This retrofit required a shut-down of UCTN for the summer, resulting in minimal
sales during this period. Although installation of the satellite dishes at
campus locations is continuing and system-wide satellite transmissions are not
expected to commence until February 1997, UCTN resumed operations at the start
of the fall 1996 semester. The existing Systems will continue to be updated via
CD-ROM until the satellite transmissions commence.
Because of the substantial cost to retrofit the existing Systems, the
Company had delayed production of additional units until the new technolgy was
available and field tests were completed. This delay, combined with the
deinstallation of
-9-
<PAGE>
locations not suited to receive satellite transmissions, resulted in minimal
growth of the network over the past year.
The Company's sales are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its sales during September through May and substantially
less during the summer months when colleges and universities do not hold regular
sessions.
The following table sets forth certain financial data derived from the
Company's statement of operations for the fiscal years ended October 31, 1996
("Fiscal 1996"), October 31, 1995 ("Fiscal 1995") and October 31, 1994 ("Fiscal
1994"):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
October 31, 1996 October 31, 1995 October 31, 1994
----------------------- --------------------- -------------------
% of % of % of
$ Sales $ Sales $ Sales
----------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sales....................... $2,016,152 100% $1,621,465 100% $ 705,413 100%
Cost of sales............... 1,297,684 64 1,252,420 77 1,163,003 165
Selling, general and
administrative ............ 2,837,331 141 2,947,498 182 2,545,680 361
Interest income............. 67,411 3 84,066 5 92,586 13
Net loss.................... 2,051,452 102 2,494,387 154 2,910,684 413
</TABLE>
Sales increased to $2,016,152 for Fiscal 1996 from $1,621,465 for Fiscal
1995 and $705,413 for Fiscal 1994. This represents a 24% increase over Fiscal
1995 and a 186% increase over Fiscal 1994. The Company's advertiser base
increased to 19 advertisers during Fiscal 1996 and included Visa, Warner
Brothers, Coca Cola, Universal Pictures, Discover Card, UPS and MasterCard. This
compares to 17 advertisers during Fiscal 1995 and 7 during Fiscal 1994. In
addition, the Company increased its advertising rates charged during Fiscal
1996. The Company anticipates continued sales growth during the year ending
October 31, 1997 ("Fiscal 1997") by continuing to expand its advertiser base and
by further increasing the amount charged for its advertising spots to reflect
the anticipated increase in viewership. Although the Company has agreements with
national advertisers and has held discussions or had prior agreements with other
national advertisers, no assurance can be given that these or other advertisers
will continue to purchase advertising time from the Company, or that future
significant advertising revenues will ever be generated. A failure to
significantly increase advertising revenues could have a material impact on the
operations of the Company.
-10-
<PAGE>
Cost of sales totaled $1,297,684 for Fiscal 1996. This compares to
$1,252,420 for Fiscal 1995 and $1,163,003 for Fiscal 1994. The increase in
Fiscal 1996, due to costs associated with the planning of the retrofit to
accommodate a satellite delivered system and increased costs to update the
programming in the Systems, were substantially offset by a decrease in
installation costs associated with a delay in new installations until the
retrofit was completed and a decrease in depreciation expense related to the
Company's use of accelerated depreciation. The increase in Fiscal 1995 over
Fiscal 1994 relates directly to the increase of the installed base of UCTN. Cost
of sales as a percentage of sales decreased to 64% in Fiscal 1996 from 77% and
165% in Fiscal 1995 and Fiscal 1994, respectively. Although cost of sales, which
include costs associated with System installations, maintenance, network
programming and System depreciation, is expected to continue to increase as
additional locations are added, the trend of decreases as a percentage of sales
is expected to continue because of added operating efficiencies.
Selling, general and administrative ("SG&A") expenses decreased to
$2,837,331 for Fiscal 1996 versus $2,947,498 for Fiscal 1995 and $2,545,680 for
Fiscal 1994. SG&A expenses as a percentage of sales decreased to 141% in Fiscal
1996 from 182% and 361% in Fiscal 1995 and Fiscal 1994, respectively. The
Company made a concerted effort during Fiscal 1996 to maintain the same level of
SG&A expense as in Fiscal 1995. Stock compensation expense of $165,249 was
recognized in Fiscal 1995 as a result of an extension of a certain officer's
stock option. The elimination of this expense in Fiscal 1996 more than offset
the increased advertising agency fees, which is directly related to the sales
growth. Increased advertising agency fees in Fiscal 1995 was the primarily the
source of the increase over Fiscal 1994.
In February 1994, the fair market value of the Company's Common Stock
exceeded $5.50 per share for ten consecutive trading days and, therefore,
options issued to certain officers of the Company under the Company's 1990
Performance Equity Plan, representing 37,134 shares of Common Stock, became
exercisable. Compensation expense relating to these options of $202,195 in
Fiscal 1994 have been recorded as SG&A expense.
Interest income continued to decrease to $67,411 for Fiscal 1996 as
compared to $84,066 for Fiscal 1995 and $92,586 for Fiscal 1994. The decreases
are a result of a combination of lower interest rates and lower average cash
balances.
The Company has incurred substantial losses since commencement of its
operations and anticipates that such losses will continue in Fiscal 1997. The
net loss decreased by 18% to $2,051,452 for Fiscal 1996 as compared to a net
loss of
-11-
<PAGE>
$2,494,387 for Fiscal 1995. The Company incurred a net loss of $2,910,684 for
Fiscal 1994. The decrease in the Fiscal 1996 and 1995 net losses over their
respective previous years is primarily attributed to increased sales while a
large portion of costs associated with the operation of UCTN remained relatively
fixed. In order to reach the stage where the Company is profitable, it is
expected that additional financing will be required to fund the Company's
planned expansion.
Financial Condition and Liquidity
At October 31, 1996, the Company had working capital of $1,495,008. At such
date, the Company's cash and cash equivalents totaled $1,158,738.
Pursuant to a private placement offering, the Company issued an aggregate
of 4,914,293 shares of its Common Stock at $.70 per share on April 26, 1996 and
May 28, 1996. The offering resulted in net proceeds of $2,939,288, after payment
of placement expenses and agent commissions. Under this private placement,
warrants to purchase an additional 4,914,293 shares of its Common Stock were
also issued. The warrants, which are exercisable at $1.29 per share, will expire
five years from the issue date. The Company has registered the shares of Common
Stock issued pursuant to this private placement and the shares of Common Stock
to be issued upon exercise of the warrants. Cash provided during Fiscal 1996 was
primarily from this private placement.
On January 30, 1995, the Company issued, through a private placement
offering, 500,000 shares of its Common Stock at $2.8125 per share. The issuance
resulted in net proceeds of $1,246,232 after payment of placement expenses and
agent commissions. On March 13, 1995, the Company issued, through a private
placement offering, 250,000 additional shares of its Common Stock at $2.45 per
share. The issuance resulted in net proceeds of $554,630 after payment of
placement expenses and agent commissions. Cash provided during Fiscal 1995 was
primarily from these private placements ($1,800,862) and net proceeds of short-
term investments ($745,297).
Cash used in operations decreased to $1,486,530 in Fiscal 1996 from
$2,202,910 in Fiscal 1995, primarily as a result of the increase in sales while
expenses remained relatively fixed. Management believes that positive cash flow
from operations can be achieved with approximately 200 installed locations,
provided, however, that national advertisers agree to purchase at least 12
commercial spots for a period of eight months per year at the Company's current
rates. Each spot represents a 30-second commercial displayed each hour during
normal operating hours on all available entertainment systems. Such level of
revenues represents approximately 75% of potential capacity. The Company's sales
in both Fiscal 1996 and Fiscal 1995 represented
-12-
<PAGE>
approximately 33% of capacity. There are no assurances that such required level
of revenues can be achieved and if such level is achieved, that positive cash
flow would result.
Purchases of property and equipment, net of the sale of obsolete equipment,
increased to $941,227 in Fiscal 1996 from $307,472 in Fiscal 1995 due to the
conversion of UCTN to a satellite delivered network. Installation of new Systems
during Fiscal 1996 was minimal as a result of the retrofitting of the existing
systems.
The Company executed an equipment rental agreement with Hughes Network
Systems on November 22, 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.
As previously discussed, 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, it is
expected that additional financing will be required to fund the Company's
planned expansion. The Company is expected to seek additional financing,
however, there can be no assurance that such financing will be obtained and if
so, on terms favorable to the Company.
In the event the Company does not achieve anticipated revenue levels and/or
obtain additional financing, the Company expects to reduce its operating
expenses by, among other actions, downsizing its personnel and reducing its
marketing, promotional and product development costs in an effort to reduce cash
requirements. Reduction of operating expenses alone is not expected to assure
profitability.
ITEM 7. FINANCIAL STATEMENTS.
See the financial statements and notes related thereto, beginning on page
F-1, included elsewhere in this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
-13-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Information with respect to Item 9 is set forth in the Company's Proxy
Statement for its 1997 Annual Meeting of Stockholders (the "1997 Proxy
Statement") and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION.
Certain information with respect to Item 10 is set forth in the 1997 Proxy
Statement and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to Item 11 is set forth in the 1997 Proxy
Statement and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
-14-
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
3.1 - Composite Amended and Restated Certificate of
Incorporation of the Registrant.
3.2 - By-Laws of the Registrant (incorporated herein by
reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (No. 33-44935), as
amended, declared effective on June 10, 1992 (the
"Form S-1")).
4.1 - Form of Unit Purchase Option (incorporated herein by
reference to Exhibit 4.1 to the Form S-1).
4.2 - Form of the Warrant Agreement (with Warrant
Certificates) between the Registrant and the
Underwriter (incorporated herein by reference to
Exhibit 4.2 to the Form S-1).
4.3 - Specimen certificates representing Class A Warrants,
Class B Warrants and Common Stock (incorporated herein by
reference to Exhibit 4.3 to the Form S-1).
4.4 - Certificate of Designations, Rights and Preferences of
Series A Redeemable Preferred Stock, as amended
(incorporated herein by reference to Exhibit 3.3 to
the Form S-1).
4.5 - Form of Series A Preferred Stock Certificate
(incorporated herein by reference to Exhibit 10.8 to
the Form S-1).
10.1 - Amended and Restated Employment Agreement and Stock
Option Agreements, dated as of November 1, 1991,
between the Registrant and Peter Kauff (incorporated
herein by reference to Exhibit 10.1 to the Form S-1).
10.2 - Registrant's 1990 Performance Equity Plan
(incorporated herein by reference to Exhibit 10.4 to
the Form S-1).
10.3 - Employment Agreement and Stock Option Agreements,
dated as of September 16, 1992, between the Registrant
and Alan Pearl (incorporated herein by reference to
Exhibit 10.3 to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended October 31, 1992).
10.4 - Employment Agreement and Stock Option Agreements,
dated as of September 8, 1992, between the Registrant
and Richard Vogel (incorporated herein by reference to
Exhibit 10.19 to the Registrant's Post-Effective
Amendment No. 1 to the Form S-1, filed on August 26,
1993).
10.5 - Registrant's Outside Directors' 1994 Stock Option Plan
(incorporated herein by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended October 31, 1994, filed on January 30,
1995 (the "1994 Form 10-KSB")).
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
10.6 - Amendment Agreement to Employment Agreement, dated as
of February 1, 1994, between the Registrant and Peter
Kauff (incorporated herein by reference to Exhibit
10.16 to the 1994 Form 10-KSB).
10.7 - Registrant's 1996 Stock Incentive Plan (incorporated
herein by reference to Exhibit A to the Registrant's
definitive proxy statement with respect to its 1996
Annual Meeting of Stockholders on Form 14A, filed on
July 1, 1996 (the "1996 Proxy Statement").
10.8 - Registrant's Outside Directors' 1996 Stock Option Plan
(incorporated herein by reference to Exhibit B to the
1996 Proxy Statement).
10.9 - Second Amendment Agreement to Employment Agreement,
dated as of October 1, 1995, between the Registrant
and Peter Kauff (incorporated herein by reference to
Exhibit 10.18 to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended October 31, 1995
(the "1995 Form 10-KSB").
10.10 - Amendment Agreement to Employment Agreement, dated as
of September 8, 1995, between the Registrant and
Richard Vogel (incorporated herein by reference to
Exhibit 10.19 to the 1995 Form 10-KSB).
10.11 - Amendment Agreement to Employment Agreement, dated as
of September 16, 1995, between the Registrant and Alan
Pearl (incorporated herein by reference to Exhibit
10.20 to the 1995 Form 10-KSB).
10.12 - Employment Agreement, dated as of January 1, 1996,
10.13 - Employment Agreement, dated August 1, 1996, between
the Registrant and Robert Douglas.
10.14 - Third Amendment Agreement to Employment Agreement,
dated as of September 12, 1996, between the Registrant
and Peter Kauff.
10.15 - Second Amendment Agreement to Employment Agreement,
dated as of September 12, 1996, between the Registrant and
Alan Pearl.
10.16 - Programming Agreement, dated as of November 5, 1996,
by and between the Registrant and Turner Private Networks,
Inc.
10.17 - Equipment Rental Agreement, dated November 22, 1996,
between the Registrant and Hughes Network Systems, Inc.,
doing business as DirecPC.
27 - Financial Data Schedule
</TABLE>
- --------------------
(b) Reports on Form 8-K.
None.
-16-
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: February 3, 1997 UC TELEVISION NETWORK CORP.
By: /s/ Peter Kauff
---------------------
Peter Kauff
Chairman of the Board
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Peter Kauff Chairman of the February 3, 1997
- ---------------------- Board; and Director
Peter Kauff (Principal Executive
Officer)
/s/ Alan Pearl Chief Financial February 3, 1997
- ---------------------- Officer; Treasurer;
Alan Pearl and Secretary (Principal
Accounting and
Financial Officer)
/s/ Stephen Roberts Director February 3, 1997
- ----------------------
Stephen Roberts
/s/ Edward McLaughlin Director February 3, 1997
- ----------------------
Edward McLaughlin
/s/ Edward Weinberger Director February 3, 1997
- ----------------------
Edward Weinberger
</TABLE>
-17-
<PAGE>
UC TELEVISION NETWORK CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
------
Report of Independent Auditors F-2
Balance Sheet as at October 31, 1996 F-3
Statements of Operations for the years ended October 31, 1996
and October 31, 1995 F-4
Statements of Changes in Stockholders' Equity for the years
ended October 31, 1996 and October 31, 1995 F-5
Statements of Cash Flows for the years ended October 31, 1996
and October 31, 1995 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
UC Television Network Corp.
New York, New York
We have audited the accompanying balance sheet of UC Television Network
Corp. (formerly Laser Video Network, Inc.) as at October 31, 1996 and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of UC Television
Network Corp. at October 31, 1996 and the results of its operations and its cash
flows for the two years then ended in conformity with generally accepted
accounting principles.
/s/ Richard A. Eisner & Company, LLP
------------------------------------
New York, New York
January 13, 1997
F-2
<PAGE>
UC TELEVISION NETWORK CORP.
BALANCE SHEET
October 31, 1996
ASSETS
Current assets:
Cash and cash equivalents ............................... $1,158,738
Accounts receivable ..................................... 761,796
Prepaid expenses ........................................ 91,324
Other current assets .................................... 18,530
----------
Total current assets ................................. 2,030,388
Property and equipment, net .............................. 1,641,456
Other assets ............................................. 7,040
----------
TOTAL ................................................ $3,678,884
==========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses .................. $ 533,461
Dividends payable ...................................... 1,919
----------
Total current liabilities ........................... 535,380
----------
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 50,000,000 shares;
issued and outstanding 10,929,157 shares .............. 10,929
Additional paid in capital .............................. 14,846,451
Accumulated deficit ..................................... (11,717,209)
------------
Total stockholders' equity .......................... 3,140,171
------------
TOTAL ............................................... $ 3,678,884
============
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF OPERATIONS
Year Ended
October 31,
-------------------------
1996 1995
------------ ----------
<TABLE>
<CAPTION>
<S> <C> <C>
Sales................................ $2,016,152 $1,621,465
---------- ----------
Cost of sales........................ 1,297,684 1,252,420
Selling, general and administrative.. 2,837,331 2,947,498
Interest income...................... (67,411) (84,066)
---------- ----------
4,067,604 4,115,852
----------- -----------
NET LOSS ............................ $(2,051,452) $(2,494,387)
=========== ===========
Loss per share ...................... $ (0.25) $ (0.44)
Weighted average number of
common shares outstanding .......... 8,335,007 5,739,898
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-In
Shares Amount Capital (Deficit)
------------ --------- ----------- -------------
<S> <C> <C> <C> <C>
Balance - November 1, 1994 5,204,764 $ 5,205 $ 9,903,746 $ (7,171,370)
Proceeds from private placement offerings - net of expenses.................. 750,000 750 1,800,112
Proceeds from Class A Warrant exercise....................................... 100 450
Stock compensation expense................................................... 165,429
Preferred stock dividends declared........................................... (9,801)
Net loss..................................................................... (2,494,387)
---------- -------- ----------- ------------
Balance - October 31, 1995 5,954,864 5,955 11,859,936 (9,665,757)
Proceeds from private placement offerings - net of expenses.................. 4,914,293 4,914 2,934,374
Issuance of Common Stock for services........................................ 60,000 60 59,940
Preferred stock dividends declared........................................... (7,799)
Net loss..................................................................... (2,051,452)
---------- -------- ----------- ------------
BALANCE - OCTOBER 31, 1996 10,929,157 $ 10,929 $14,846,451 $(11,717,209)
========== ======== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
October 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................................. $(2,051,452) $(2,494,387)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................................................... 443,556 578,386
Write down of certain entertainment equipment components............................... 31,794 12,508
Issuance of Common Stock for services.................................................. 60,000
Compensation expense relating to nonqualified stock options............................ 165,429
Changes in operating assets and liabilities:
Increase in accounts receivable....................................................... (118,138) (459,981)
Decrease (increase) in prepaid expenses and other assets.............................. 11,200 (116)
Increase (decrease) in accounts payable and accrued expenses.......................... 136,510 (4,749)
----------- -----------
Net cash used in operating activities................................................ (1,486,530) (2,202,910)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment...................................................... (1,265,497) (307,472)
Proceeds from sale of obsolete components................................................ 324,270
Proceeds from short-term investments..................................................... 1,250,000
Purchases of short-term investments...................................................... (504,703)
----------- -----------
Net cash provided by (used in) investing activities.................................. (941,227) 437,825
----------- -----------
Cash flows from financing activities:
Net proceeds from private placement offerings............................................. 2,939,288 1,800,862
Redemption of redeemable preferred stock (including dividends of
$51,883 in 1996 and $1,387 in 1995)..................................................... (145,217) (4,720)
Net proceeds from exercise of Class A Warrants............................................ 450
----------- -----------
Net cash provided by financing activities............................................ 2,794,071 1,796,592
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................................................. 366,314 31,507
Cash - beginning of period................................................................. 792,424 760,917
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD.................................................. $ 1,158,738 $ 792,424
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
UC TELEVISION NETWORK CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and its Significant Accounting Policies:
[1] The Company:
UC Television Network Corp., formerly Laser Video Network, Inc. ("the
Company"), is a broadcasting company which owns and operates the UC Television
Network ("UCTN"), 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 UCTN. At October 31, 1996, the Company had an installed base of
approximately 200 entertainment systems at various colleges and universities
throughout the United States.
The Company has incurred substantial losses since inception and anticipates
losses to continue through 1997 although at a reduced rate. During fiscal 1996,
the Company raised approximately $2.9 million in a private placement offering
and had a significant increase in sales and decrease in cash used in operations
from the prior year. The Company anticipates a further increase in sales in 1997
and expects to seek additional financing for its planned expansion. There is no
assurance that either will occur and, if not, the Company will have to modify
its expansion plans and reduce operating costs. However, the Company believes it
will have sufficient working capital to continue its operations through October
31, 1997.
[2] Depreciation and amortization:
Property and equipment, stated at cost, are depreciated by accelerated
methods over their estimated useful lives of five years for completed
interactive entertainment equipment and five to seven years for other assets.
[3] Revenue recognition
The Company's principal sales are derived from advertising displayed on
UCTN. Advertising sales are reflected in income during the period advertising is
aired. For the year ended October 31, 1996, approximately 47% of sales were
derived from advertising sold to three customers, $440,000, $302,500 and
$210,000. For the year ended October 31, 1995, approximately 26% of sales were
derived from advertising sold to two customers, such sales for the year totaled
$247,500 and $171,500.
The Company's revenues are affected by the pattern of seasonally 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. Furthermore, the Company retrofitted
its existing systems during the summer months of 1996 in order to be able to
utilize satellite transmission technology as a means of updating its programming
on UCTN. This retrofit required a shut down of the network, resulting in minimal
sales during this period.
F-7
<PAGE>
(NOTE A) - The Company and its Significant Accounting Policies: (Continued)
[4] Statements of cash flows:
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. The Company places its temporary cash
investments with high credit quality financial institutions. Such investments
often exceed the FDIC limits or are not covered by insurance.
[5] Estimates and assumptions:
The preparation of the 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
[6] Loss per share:
Loss per common share is based on the weighted average number of common
shares outstanding and gives effect to a 10% preferred stock dividend.
(NOTE B) - Property and Equipment:
Property and equipment consist of the following:
Entertainment systems, completed............................. $3,003,647
Entertainment systems, in progress........................... 279,774
Machinery and equipment...................................... 162,062
Furniture and fixtures....................................... 41,603
----------
3,487,086
Less accumulated depreciation
and amortization........................................... 1,845,630
----------
Total...................................................... $1,641,456
==========
(NOTE C) -Redeemable Preferred Stock:
The Company's redeemable preferred stock has no voting rights and has a
liquidation preference equal to $1.00 per share plus accrued and unpaid
dividends. The stock is redeemable at any time, at the option of either the
Company or the holder thereof. Of the 1,500,000 shares originally authorized,
3,333 shares were issued and outstanding at October 31, 1996. Dividends, accrued
at 10%, totaled $7,799 for fiscal 1996 of which $1,919 was payable at October
31, 1996.
F-8
<PAGE>
(NOTE D) - Stockholders' Equity:
[1] Issuance of Common Stock
Pursuant to a private placement offering, the Company issued an aggregate
of 4,914,293 shares of its Common Stock at $.70 per share on April 26, 1996 and
May 28, 1996. The offering resulted in net proceeds of $2,939,288, after payment
of placement expenses and agent commissions. Under this private placement,
warrants to purchase an additional 4,914,293 shares of its Common Stock were
also issued. The warrants, which are exercisable at $1.29 per share, will expire
five years from the issue date. The Company has registered the shares of Common
Stock issued and to be issued pursuant to this private placement. In conjunction
with the private placement, an option was issued to the placement agent to
purchase units representing up to 491,428 shares of Common Stock at $.70 per
share. With each share purchased, the placement agent will receive a warrant to
purchase one share of Common Stock for $1.29. Such option expires on April 25,
2001.
On January 30, 1995, the Company issued, through a private placement
offering, 500,000 additional shares of its Common Stock at $2.8125 per share.
The issuance resulted in net proceeds of $1,246,232 after payment of placement
expenses and agent commissions. On March 13, 1995, the Company issued, through a
private placement offering, 250,000 additional shares of its Common Stock at
$2.45 per share. The issuance resulted in net proceeds of $554,630 after payment
of placement expenses and agent commissions.
[2] Warrants:
At October 31, 1996, the Company had outstanding 144,979 Redeemable Class A
Warrants and 2,270,021 Redeemable Class B Warrants. The holder of each Class A
Warrant is entitled to purchase 1.3 shares of Common Stock and one Class B
Warrant at an exercise price of $4.60. The holder of each Class B Warrant is
entitled to purchase 1.3 shares of Common Stock at an exercise price of $6.91.
The Warrants are subject to redemption by the Company, upon not less than 30
days written notice, at a price of $.05 per warrant, provided that the average
of the closing bid prices of the Common Stock for any 30 consecutive business
days within five business days of the date on which notice of redemption is
given exceeds $6.75 with respect to Class A Warrants and $9.75 with respect to
Class B Warrants. Both Class A and Class B Warrants expire on June 10, 1997.
[3] Unit Purchase Option:
At October 31, 1996, there was an outstanding Unit Purchase Option to
purchase up to 133,988 units (each unit consisting of two shares of Common
Stock, one Class A Warrant and one Class B Warrant) at $7.05 per unit which had
been granted to the underwriters of the Company's initial public offering. Such
option expires on June 10, 1997.
[4] Performance Equity Plan:
Under the Company's Performance Equity Plan, the Company has reserved an
aggregate of 464,164 shares of its common stock for issuance to its officers and
key employees, consultants and independent contractors in the form of long-term
performance-based stock and/or other equity interests in the Company.
F-9
<PAGE>
(NOTE D) - Stockholders' Equity: (Continued)
A summary of nonqualified stock option transactions under the Performance
Equity Plan is as follows:
Number of Exercise Price
Shares per Share
--------- --------------
Outstanding -
October 31, 1994....................275,291 $.43-$4.06
Granted...............................221,500 $1.36-$3.00
Canceled..............................(37,133) $.43
-------
Outstanding -
October 31, 1995....................459,658 $.43-$4.06
Canceled..............................(37,133) $.43
Expired...............................(20,000) $4.06
-------
Outstanding -
October 31, 1996.................... 402,525 $.43-$3.00
========
Of the 402,525 options outstanding at October 31, 1996, 243,025 are
currently exercisable. The remaining options are exercisable through 1999.
The expiration date of options to purchase 125,325 shares of Common Stock
issued to a certain officer of the Company was extended from December 31, 1996
to September 30, 1998 to coincide with the expiration of an extension of such
officer's employment agreement. Compensation expense related to the extension of
$165,429 has been recorded as selling, general and administrative expense during
the year ended October 31, 1995. At October 31, 1996, 61,639 shares of Common
Stock were available for future grants.
[5] Stock Incentive Plan:
The 1996 Stock Incentive Plan was approved by stockholders on March 20,
1996. Under the Company's Stock Incentive Plan, the Company has reserved an
aggregate of 500,000 shares of its common stock for issuance to its officers,
key employees and consultants in the form of stock options and/or other forms of
equity interests in the Company. During fiscal 1996, options for 304,766 shares
were granted at exercise prices of ranging from $1.00 to $1.44 per share. Of the
304,766 options outstanding at October 31, 1996, 104,266 are currently
exercisable. The remaining options are exercisable through 2000. At October 31,
1996, 195,234 shares of Common Stock were available for future grants.
F-10
<PAGE>
(NOTE D) - Stockholders' Equity: (Continued)
[6] Outside Directors' Stock Option Plan
The Outside Directors' 1996 Stock Option Plan ("Directors' Plan") was
approved by stockholders on March 20, 1996. Under the Directors' Plan, the
Company has reserved an aggregate of 150,000 shares of its common stock for
issuance to its non-employee Directors. Upon stockholder adoption of the
Directors' Plan, the only eligible outside Director was granted options to
acquire 20,000 shares of the Company's common stock at the market price on the
date of the grant. Upon initial election to the board, subsequent eligible
Directors receive an option to purchase 10,000 shares. Eligible Directors are
granted an additional 10,000 shares each February 14 provided they have served
on the Board at least six months as of that date. Such option grants are vested
ratably over a four year period.
During fiscal 1996, options for 30,000 shares were granted to outside
Directors at an exercise price of $1.19 per share. At October 31, 1996, 120,000
shares of Common Stock were available for future grants.
[7] Other Stock Options
During fiscal 1996, non-qualified options to purchase 337,500 shares of
Common Stock at an exercise price of $1.31 per share were granted to a certain
officer of the Company. The options are exercisable through 2000, however no
options were exercisable at October 31, 1996.
(NOTE E) - Commitments and Contingencies:
[1] Employment agreements:
The Company has employment agreements with four officers and an employee.
The agreements call for minimum base salaries for the years ending October 31,
1997, 1998, 1999, 2000 and 2001 of approximately $688,594, $494,583, $360,000,
$250,000 and $41,667, respectively. The agreement with one of the officers also
provide for bonuses in the aggregate of up to 5% of the pre-tax income of the
Company.
[2] Leases:
The Company leases certain of its office facilities under two operating
leases, expiring in 1997. Rent expense amounted to $146,426 and $141,315 for the
year ended October 31, 1996 and October 31, 1995, respectively. The minimum
annual rental payments for the year ending October 31, 1997 is $56,250.
[3] Contingencies:
In connection with the Company's acquisition of the rights to and inventory
of video jukeboxes in 1991, the Company agreed to pay Larry Abrams and Wendl
Thomis, two former stockholders of the seller, an aggregate of $100,000, one-
half being payable at such time as 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.
F-11
<PAGE>
(NOTE E) - Commitments and Contingencies: (Continued)
[4] Subsequent Events
On November 5, 1996, the Company signed an agreement with Turner Private
Networks, Inc. to provide news and sports programming on UCTN during the period
from January 1, 1997 to December 31, 1999 for a aggregate cost of $890,095,
payable in equal installments during the term of the agreement after an initial
payment of $30,000.
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.
(NOTE F) - Income Taxes:
At October 31, 1996, the Company has net operating loss carryforwards of
approximately $10,750,000 expiring through the year 2011. Due to ownership
changes, utilization of approximately $1,200,000 of the net operating loss
carryforwards is limited to approximately $300,000 per year. The Company has not
yet determined whether the shares issued in the private placement in April and
May 1996 will result in further limitations upon use of its net operating loss
carryforwards as of such dates.
The components of the deferred income tax assets arising under FASB
Statement No. 109 were as follows as at October 31, 1996:
Deferred tax assets:
Net operating loss carryforwards..........$ 3,648,000
Expenses not currently deductible......... 337,000
Less valuation allowance.................. (3,985,000)
----------
Balance..................... $ -0-
===========
The change in the valuation allowance in the years ended October 31, 1996
and October 31, 1995 was $698,000 and $885,000, respectively, which was
principally attributable to the benefit from the increase in the net operating
loss carryforwards for such years.
(NOTE G) - Related Party Transaction:
During fiscal 1996, the Company paid commissions and fees of approximately
$96,000 to a related party.
F-12
<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 January 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.)
645 Fifth Avenue - East Wing, New York, NY 10022
- -------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 888-0617
- --------------------------------------------------------------------------------
(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 March 13, 1996: 10,984,857
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
<PAGE>
UC TELEVISION NETWORK CORP.
BALANCE SHEET
January 31, 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 601,722
Accounts receivable ........................................ 700,063
Prepaid expenses ........................................... 71,440
Other current assets ....................................... 19,541
------------
Total current assets ................................ 1,392,766
Property and equipment, net ................................... 1,649,457
Other assets .................................................. 7,320
------------
TOTAL ............................................... $ 3,049,543
============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses ..................... $ 431,854
Dividends payable ......................................... 2,003
------------
Total current liabilities ................................ 433,857
------------
Redeemable preferred stock .................................... 3,333
------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Capital stock:
Redeemable preferred stock - $.001 par;
authorized 1,500,000 shares; issued and
outstanding 3,333 shares (liquidation value - $3,333 )
Preferred stock - $.001 par; authorized
500,000 shares; none issued
Common stock - $.001 par; authorized 50,000,000 shares;
issued and outstanding 10,984,857 shares ................. 10,985
Additional paid in capital .................................... 14,870,263
Accumulated deficit ........................................... (12,268,895)
------------
Total stockholders' equity .......................... 2,612,353
------------
TOTAL ............................................... $ 3,049,543
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
----------------------------------------------
1997 1996
----------------------- ---------------------
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . $ 507,500 $ 290,963
----------------------- ---------------------
Cost of sales. . . . . . . . . . . . . . . . 426,541 369,416
Selling, general and administrative. . . . . 642,763 666,763
Interest income. . . . . . . . . . . . . . . (10,118) (6,551)
----------------------- ---------------------
1,059,186 1,029,628
----------------------- ---------------------
NET LOSS. . . . . . . . . . . . . . . . . . $ (551,686) $ (738,665)
======================= =====================
Loss per share . . . . . . . . . . . . . . . $ (0.05) $ (0.12)
Weighted average number of
common shares outstanding. . . . . . . . 10,947,925 5,968,886
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
---------------- -------------
1997 1996
---------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................... $ (551,686) $ (738,665)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization ........................................... 175,201 98,347
Issuance of common stock for services ................................... 30,000
Changes in operating assets and liabilities:
Decrease in accounts receivable ....................................... 61,733 316,897
Decrease in prepaid expenses and other current assets ................. 18,873 10,603
Increase (decrease) in accounts payable and accrued expenses .......... (101,607) 220,022
----------- ---------
Net cash used in operating activities ............................... (397,486) (62,796)
----------- ---------
Cash flows used in investing activities:
Purchases of property and equipment ......................................... (183,482) (28,544)
----------- ---------
Net cash generated in investing activities .......................... (183,482) (28,544)
----------- ---------
Cash flows from (used in) financing activities:
Proceeds from exercise of employee stock options ............................ 23,952
Deferred issuance costs ..................................................... (83,755)
----------- ---------
Net cash provided by (used in) financing activities ................. 23,952 (83,755)
----------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ...................................... (557,016) (175,095)
Cash and cash equivalents - beginning of period ................................ 1,158,738 792,424
----------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD ...................................... $ 601,722 $ 617,329
=========== =========
</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 three months ended January 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., formerly Laser Video Network, Inc. ("the
Company"), is a broadcasting company which owns and operates the UC Television
Network ("UCTN"), 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 UCTN. At January 31, 1997, UCTN was installed or contracted for
installation at approximately 227 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) - Commitments and Contingencies:
On November 5, 1996, the Company signed an agreement with Turner
Private Networks, Inc. to provide news and sports programming on UCTN during the
period from January 1, 1997 to December 31, 1999 for a aggregate cost of
$890,095, payable in equal installments during the term of the agreement after
an initial payment of $30,000.
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. This arrangement will be classified as a capital lease
at such time the equipment is placed into service.
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 UCTN, a private commercial television network.
At January 31, 1997, UCTN was installed or contracted for installation at
approximately 227 locations in various colleges and universities throughout the
United States. Substantially all of its revenues are derived from advertising
displayed on UCTN.
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 months ended January 31, 1997
("1st Quarter 1997") and January 31, 1996 ("1st Quarter 1996"):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
January 31, 1997 January 31, 1996
------------------------------- ---------------------------
% of % of
$ Sales $ Sales
------------------ ----------- --------------- -----------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . $ 507,500 100% $ 290,963 100%
Cost of sales . . . . . . . . . . . . . . . 426,541 84 369,416 127
Selling, general and administrative . . . . 642,763 127 666,763 229
Interest income . . . . . . . . . . . . . . 10,118 2 6,551 2
Net loss . . . . . . . . . . . . . . . . . 551,686 109 738,665 254
</TABLE>
Sales increased by 74% to $507,500 for 1st Quarter 1997 from $290,963
for the comparable period last year. Increased commitments from existing
customers combined with new customers was the primary source 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
February 28, 1997 at approximately 75 percent above commitments for Fiscal 1996
at the same date last year. Although the Company has agreements with national
advertisers and has held discussions or had prior agreements with other national
advertisers, no assurance can be given that these or other advertisers will
continue to purchase advertising from the Company, or that future significant
advertising revenues will ever be generated. A failure to significantly increase
advertising revenues could have a material impact on the operations of the
Company.
<PAGE>
The cost of sales increased to $426,541 for 1st Quarter 1997 from
$369,416 for the same period last year, however it decreased as a percentage of
sales to 84% for 1st Quarter 1997 from 127% for the same period 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.
Selling, general and administrative expenses decreased to $642,763 for
1st Quarter 1997 versus $666,763 for the same period last year. Fees and
commissions based on a percentage of sales are generally paid to agencies
representing advertisers on UCTN. An increase in advertising agency fees and
commissions, a direct result of increased sales, was more than offset by a
decrease in professional fees.
Interest income increased to $10,118 for 1st Quarter 1997 as compared
to $6,551 for the same period last year. The increase is attributed to higher
average cash levels during 1st Quarter 1997.
The net loss decreased to $551,686 for 1st Quarter 1997 as compared to
a net loss of $738,665 for the same period last year. In order to reach the
stage where the Company is profitable, the Company will need to continue to
expand into additional college dining facilities. Furthermore, additional
financing may be required to produce the additional systems necessary to reach
profitable operating levels.
FINANCIAL CONDITION AND LIQUIDITY
At January 31, 1997, the Company had working capital of $958,909. At
such date, the Company's cash and cash equivalents totaled $601,722.
Cash used in operations increased to $397,486 during the 1st Quarter
1997 from $62,796 for the comparable period last year. The increase was
primarily related to the timing of collections of accounts receivable and
payments of accounts payable.
Purchases of property and equipment increased to $183,482 during 1st
Quarter 1997 from $28,544 during 1st Quarter 1996 due to the ongoing conversion
of UCTN to a satellite delivered network. Installation of new systems during 1st
Quarter 1996 was minimal as a result of the anticipated retrofitting of the
network.
On November 5, 1996, the Company signed an agreement with Turner
Private Networks, Inc. to provide news and sports programming on UCTN during the
period from January 1, 1997 to December 31, 1999 for a aggregate cost of
$890,095, payable in equal installments during the term of the agreement after
an initial payment of $30,000.
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.
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, it is expected that
additional financing will be required to fund the Company's planned expansion.
The Company is expected to seek additional financing, however, there can be no
assurance that such financing will be obtained and if so, on favorable terms to
the Company.
In the event the Company does not achieve anticipated revenue levels
and/or obtain additional financing, the Company expects to reduce its operating
expenses by, among other actions, downsizing its personnel and reducing its
marketing, promotional and product development costs in an effort to reduce cash
requirements. Reduction of operating expenses alone is not expected to assure
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.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) No 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: March 17, 1997 /s/ Peter L. Kauff
------------------
Peter L. Kauff
Chairman of the Board
(Principal Executive Officer)
Date: March 17, 1997 /s/ Alan M. Pearl
-----------------
Alan M. Pearl
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting
and Financial Officer)
<PAGE>
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE JANUARY 31, 1997 QUARTERLY
REPORT FILED ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-END] JAN-31-1997
[CASH] 601,722
[SECURITIES] 0
[RECEIVABLES] 700,063
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 1,392,766
[PP&E] 3,666,066
[DEPRECIATION] (2,016,609)
[TOTAL-ASSETS] 3,049,543
[CURRENT-LIABILITIES] 433,857
[BONDS] 0
[PREFERRED-MANDATORY] 3,333
[PREFERRED] 0
[COMMON] 10,985
[OTHER-SE] 2,601,368
[TOTAL-LIABILITY-AND-EQUITY] 3,049,543
[SALES] 507,500
[TOTAL-REVENUES] 507,500
[CGS] 426,541
[TOTAL-COSTS] 426,541
[OTHER-EXPENSES] 642,763
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (551,686)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (551,686)
[EPS-PRIMARY] (.05)
[EPS-DILUTED] (.05)
</TABLE>
