<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 April 30, 1997
--------------
Commission file number 0-19997
-------
UC TELEVISION NETWORK CORP.
-------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3557317
-------- ------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
909 Third Avenue, New York, NY 10022
-------------------------------------------
(Address of Principal Executive Offices)
(212) 980-6600
--------------
(Issuer's Telephone Number, Including Area Code)
Former address: 645 Fifth Avenue - East Wing, New York, NY 10022
-----------------------------------------------------------------
(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 June 11, 1997: 40,075,766
Transitional Small Business Disclosure Format (check one): Yes No X
--- -
<PAGE>
<TABLE>
<CAPTION>
UC TELEVISION NETWORK CORP.
BALANCE SHEET
April 30, 1997
(Unaudited)
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents............ $ 602,025
Accounts receivable.................. 811,008
Receivable from U-C Holdings L.L.C... 16,200,000
Prepaid expenses..................... 46,130
Other current assets................. 30,341
--------------
Total current assets.......... 17,689,504
Property and equipment, net............. 1,676,505
Other assets............................ 7,320
--------------
TOTAL......................... $ 19,373,329
==============
LIABILITIES
Current liabilities:
Current portion of obligations $ 80,130
under capital leases...............
Accounts payable and accrued 1,179,224
expenses...........................
Dividends payable................... 2,083
Total current liabilities.......... 1,261,437
--------------
Obligations under capital leases........ 115,416
--------------
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 40,075,766 40,076
shares............................
Additional paid in capital.............. 30,321,452
Accumulated deficit..................... (12,368,385)
--------------
Total stockholders' equity.... 17,993,143
--------------
TOTAL......................... $ 19,373,329
==============
</TABLE>
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 Six Months Ended
April 30, April 30,
----------------------------------------------------------
1997 1996 1997 1996
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C>
Sales................................ $ 1,153,925 $ 828,250 $ 1,661,425 $1,119,213
----------- ---------- ----------- ----------
Cost of sales........................ 478,504 307,954 905,045 677,370
Selling, general and administrative.. 788,276 688,590 1,431,039 1,355,353
Interest expense..................... 6,686 6,686
Interest income...................... (20,051) (4,435) (30,169) (10,986)
----------- ---------- ----------- ----------
1,253,415 992,109 2,312,601 2,021,737
----------- ---------- ----------- ----------
NET LOSS............................. $ (99,490) $ (163,859) $ (651,176) $ (902,524)
=========== ========== =========== ==========
Loss per share....................... ($0.01) ($0.03) ($0.06) ($0.15)
Weighted average number of
common shares outstanding........ 12,619,178 6,119,785 11,783,552 6,044,335
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
UC TELEVISION NETWORK CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
---------------------------
1997 1996
-------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $ (651,176) $ (902,524)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization...................................... 372,934 197,396
Issuance of common stock for services.............................. 30,000
Changes in operating assets and liabilities:
Increase in accounts receivable.................................. (49,212) (7,130)
Decrease in prepaid expenses and other current assets............ 33,383 39,521
Increase in other assets......................................... (280)
Increase (decrease) in accounts payable and accrued expenses..... (73,877) 196,771
------------ ----------
Net cash used in operating activities.......................... (368,228) (445,966)
------------ ----------
Cash flows from investing activities:
Purchases of property and equipment.................................... (407,983) (7,478)
------------ ----------
Proceeds from sale of equipment........................................ 22,125
------------ ----------
Net cash provided by (used in) investing activities............ (407,983) 14,647
Cash flows from financing activities:
Proceeds from sale of common stock..................................... 16,223,952 1,761,968
Transfer of proceeds from sale of common stock to Escrow Agent......... (16,200,000)
Increase in capitalized lease obligations.............................. 195,546
------------ ----------
Net cash provided by financing activities...................... 219,498 1,761,968
------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... (556,713) 1,330,649
Cash - beginning of period................................................ 1,158,738 792,424
------------ ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD................................. $ 602,025 $2,123,073
============ ==========
</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 April 30, 1997 are not
necessarily indicative of the results of operations for the full fiscal year
ending October 31, 1997.
NOTE (A) - The Company:
- -----------------------
UC Television Network Corp. ("the Company") is a broadcasting company which
owns and operates the 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 April 30, 1997, UCTN was
installed or contracted for installation at approximately 214 locations in
various colleges and universities throughout the United States.
The Company's revenues are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its revenues during the period of September through May
and substantially less revenues during the summer months when colleges and
universities do not hold regular classes.
NOTE (B) - Private Placement:
- -----------------------------
Pursuant to the terms of a purchase agreement dated as of April 25, 1997
between the Company and U-C Holdings, L.L.C., a Delaware limited liability
company (the "Purchaser"), for an aggregate purchase price of $16,200,000, the
Company issued to the Purchaser 29,090,909 shares of Common Stock and a Class C
Warrant to purchase 3,863,662 shares of Common Stock for $.55 per share. In
addition, the Company and the Purchaser entered into certain equity protection
agreements to protect the Purchaser's percentage ownership interest in the
Company from dilution from third party exercises of outstanding warrants and
options to acquire the Company's Common Stock. Such agreements provide the
purchaser with the right to acquire additional shares of the Company's Common
Stock. All of the purchase price was not actually delivered to the Company
until May 12, 1997, due to an escrow arrangement and certain payment terms.
At April 30, 1997, the purchase price of $16,200,000 was classified as
Receivable from U-C Holdings, L.L.C. and expenses related to this private
placement of $719,639 were accrued and included with Accounts Payable and
Accrued Expenses.
<PAGE>
NOTE (C) - Commitments and Contingencies:
- -----------------------------------------
The Company executed an equipment rental agreement with Hughes Network
Systems on November 6, 1996. The agreement calls for the installation of 200
systems for receiving satellite transmissions with payments aggregating $328,032
over a three year period. At the end of such period, the Company may purchase
the equipment for $1.00. A total of $195,546 have been classified as capital
lease obligations, representing equipment placed into service through April 30,
1997.
In connection with the acquisition of certain assets, the Company agreed to
pay two former shareholders of the seller an aggregate of $100,000, one-half
being payable at such time the Company's net pre-tax income equals at least
$500,000, and the balance being payable at such time as the Company has an
additional $500,000 in net pre-tax earnings.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements appearing elsewhere in this report.
Information contained or incorporated by reference in this report contains
"forward looking statements" which can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "will," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. No assurance can be given that the
future results covered by the forward-looking statements will be achieved.
RESULTS OF OPERATION
The Company is a broadcasting company whose principal activities involve
operating and marketing UCTN, a private commercial television network. At April
30, 1997, UCTN was installed or contracted for installation at approximately 214
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 and six months ended April 30,
1997 and April 30, 1996:
<TABLE>
<CAPTION>
Three Months Ended
------------------
April 30, 1997 April 30, 1996
------------------- ------------------
% of % of
$ Sales $ Sales
----------- ------ ---------- -----
<S> <C> <C> <C> <C>
Sales.................................. $1,153,925 100% $ 828,250 100%
Cost of sales.......................... 478,504 41 307,959 37
Selling, general and administrative . 788,276 68 688,590 83
Interest expense....................... 6,686 - -
Interest income........................ 20,051 2 4,435 -
Net loss............................... 99,490 9 163,859 20
Six Months Ended
------------------
April 30, 1997 April 30, 1996
------------------- ------------------
% of % of
$ Sales $ Sales
----------- ------ ---------- -----
Sales.................................. $1,661,425 100% $1,119,213 100%
Cost of sales.......................... 905,045 55 677,370 61
Selling, general and administrative . 1,431,039 86 1,355,353 121
Interest expense....................... 6,686 -
Interest income........................ 30,169 2 10,986 1
Net loss............................... 651,176 39 902,524 81
</TABLE>
<PAGE>
Sales increased to $1,153,925 and $1,661,425 for the three and six-month
periods ended April 30, 1997, respectively, versus $828,250 and $1,119,213 for
the comparable periods last year. Increased commitments from existing customers
combined with new customers were the primary sources of this increase. The
Company anticipates continued sales growth during the year ending October 31,
1997 ("Fiscal 1997"), with advertising commitments for Fiscal 1997 as of May 31,
1997 at approximately 55 percent above commitments for Fiscal 1996 at the same
date last year.
The cost of sales increased to $478,504 and $905,045 for the three and six-
month periods ended April 30, 1997, respectively, from $307,959 and $677,370 for
the comparable periods last year. The increase over the prior year is primarily
attributed to increased depreciation expense relating to the retrofit of
existing systems to utilize satellite transmission technology. Additional
programming costs were incurred during the three months ended April 30, 1997
("2nd Quarter 1997") with the commencement of news and sports programming
provided by Turner Private Networks, Inc. in April 1997.
Selling, general and administrative expenses increased to $788,276 and
$1,431,039 for the three and six-month periods ended April 30, 1997,
respectively, as compared to $688,590 and $1,355,353 for the comparable periods
last year. Fees and commissions, based on a percentage of sales, are generally
paid to agencies representing advertisers on UCTN. Increases in advertising
agency fees and commissions during the three and six month periods ended April
30, 1997 is directly attributable to the increased sales over the same period.
Interest expense related to an equipment rental agreement with Hughes
Network Systems totaled $6,686 for the 2nd Quarter 1997. Interest income
increased to $20,051 and $30,169 for the three and six-month periods ended April
30, 1997, respectively, as compared to $4,435 and $10,986 for the comparable
periods last year. The increase is related to proceeds from the private
placement described below.
The net loss decreased to $99,490 and $651,176 for the three and six-month
periods ended April 30, 1997, down from $163,859 and $902,524 for the comparable
periods last year. The Company has incurred substantial losses since
commencement of its operations and anticipates that such losses will continue in
Fiscal 1997. In order to reach the stage where the Company is profitable, the
Company will need to continue to expand into additional college dining
facilities. The Company plans to use the proceeds of the private placement
described below to expand its network and advertiser base. To achieve these
objectives, the Company expects to add additional personnel and incur additional
costs for improved programming and equipment for new locations in advance of
recognizing additional revenues. Management anticipates the financial results
to be impacted by these additional expenditures through at least the end of the
current fiscal year.
FINANCIAL CONDITION AND LIQUIDITY
At April 30, 1997, the Company had working capital of $16,428,067. At such
date, the Company's cash and cash equivalents totaled $602,025.
Cash used in operations decreased to $368,228 during the six months ended
April 30, 1997 from $445,966 for the comparable period last year. The decrease
is primarily related to increased sales.
Purchases of property and equipment increased to $407,983 during the six
months ended April 30, 1997 from $7,478 for the comparable period last year due
to the ongoing conversion of UCTN to a satellite delivered network.
Installation of new systems during the first six months of Fiscal 1996 were
minimal as a result of the anticipated retrofitting of the network.
<PAGE>
Pursuant to the terms of a purchase agreement dated as of April 25, 1997
between the Company and U-C Holdings, L.L.C., a Delaware limited liability
company (the "Purchaser"), for an aggregate purchase price of $16,200,000, the
Company issued to the Purchaser 29,090,909 shares of Common Stock and a Class C
Warrant to purchase 3,863,662 shares of Common Stock for $.55 per share. In
addition, the Company and the Purchaser entered into certain equity protection
agreements to protect the Purchaser's percentage ownership interest in the
Company from dilution from third party exercises of outstanding warrants and
options to acquire the Company's Common Stock. Such agreements provide the
purchaser with the right to acquire additional shares of the Company's Common
Stock. All of the purchase price was not actually delivered to the Company
until May 12, 1997, due to an escrow arrangement and certain payment terms. The
net proceeds of this private placement of approximately $15,480,000 is expected
to be used, among other things, to expand the network and the advertiser base by
adding additional personnel, improving the programming shown on the network and
acquiring additional equipment for new locations. Management believes that this
private placement will be sufficient to finance the planned expansion, however
there is no assurance that the Company will achieve its anticipated revenue
levels or profitability.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
(c) (1) See Note B to the financial statements regarding sale of
securities to U-C Holdings, L.L.C.
(2) No underwriter fees were paid in connection with such
sale.
(3) Exempt from registration under Sections 506 of
Regulation D in Section 4 (2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) Annual meeting held on April 8, 1997
(b) Election of Directors:
(1) Peter Kauff For: 9,547,447; Withheld: 141,402
(2) Stephen Roberts For: 9,550,447; Withheld: 138,402
(3) Edward McLaughlin For: 9,550,447; Withheld: 138,402
(4) Edward Weinberger For: 9,546,447; Withheld: 142,402
However, in connection with the private placement discussed in Note B
to the Financial Statements, Messrs. McLaughlin and Weinberger
resigned as Directors, effective April 24, 1997. Jason Elkin, Joseph
Gersh, John Dobson, Avy Stein and Beth Johnston were appointed as
Directors, effective May 12, 1997.
(c) Matter Voted Upon
Appointment of Richard A. Eisner & Company as
independent auditor
For: 9,535,747; Against: 82,950; Abstaining: 70,152
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule
(b) A report on Form 8-K dated April 25, 1997 disclosed a
change in control of the Company. No other reports on Form
8-K have been filed for the quarter for which this report
is being filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UC TELEVISION NETWORK CORP.
Registrant
Date: June 16, 1997 /s/ Jason B. Elkin
----------------------------------
Jason B. Elkin
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: June 16, 1997 /s/ Alan M. Pearl
----------------------------------
Alan M. Pearl
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting
and Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS CONTAINED IN THE APRIL 30, 1997 QUARTERLY REPORT FILED ON
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 602,025
<SECURITIES> 0
<RECEIVABLES> 17,020,008
<ALLOWANCES> (9,000)
<INVENTORY> 0
<CURRENT-ASSETS> 17,689,504
<PP&E> 3,876,726
<DEPRECIATION> (2,200,221)
<TOTAL-ASSETS> 19,373,329
<CURRENT-LIABILITIES> 1,261,437
<BONDS> 0
0
3,333
<COMMON> 40,076
<OTHER-SE> 17,953,067
<TOTAL-LIABILITY-AND-EQUITY> 19,373,329
<SALES> 1,661,425
<TOTAL-REVENUES> 1,661,425
<CGS> 905,045
<TOTAL-COSTS> 905,045
<OTHER-EXPENSES> 1,422,039
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 6,686
<INCOME-PRETAX> (651,176)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (651,176)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
