<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission File Number: 0-19997
CTN MEDIA GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 13-3557317
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5784 Lake Forrest Drive, Suite 275 30328
Atlanta, Georgia (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
Issuer's Telephone Number, Including Area Code: (404) 256-9630
College Television Network, Inc.
--------------------------------
(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. X Yes No
--- ---
Number of shares of common stock outstanding as of November 9, 1999: 14,411,755
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
This quarterly report on Form 10-QSB/A is being filed as a result of the
restatement of our consolidated financial statements for the three and nine
months ended September 30, 1999. To the extent this amended filing is
inconsistent with our original quarterly report on Form 10-QSB for the three and
nine months ended September 30, 1999, the original filing is hereby superseded
and amended. To the extent the original filing is unaffected by the
restatement, the original filing has not been updated or corrected to reflect
events occurring subsequent to the date of the original filing.
<PAGE>
ITEM 1. Financial Statements
CTN MEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEET
September 30, 1999
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents -
Accounts receivable, net of allowance of $497,586 15,094,372
Prepaid expenses 523,180
Other current assets 133,469
------------
Total current assets 15,751,021
Property and equipment, net 10,506,336
Other assets 193,482
Intangible assets, net 30,685,494
------------
Total assets $ 57,136,333
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,024,498
Accrued expenses 1,602,263
Deferred revenue 1,097,275
Current portion of notes payable 1,000,000
------------
Total current liabilities $ 15,724,036
Long-term debt:
Accrued severance, net of current portion 281,201
Line of credit 1,500,000
Notes payable, less current portion 14,000,000
------------
Total liabilities $ 31,505,237
------------
Mandatorily redeemable preferred stock 24,902,593
------------
Commitments and Contingencies
Stockholders' equity:
Common stock - $.005 par; authorized
50,000,000 shares;
issued and outstanding 14,411,755 shares 72,059
Additional paid in capital 36,194,454
Unearned compensation (883,370)
Accumulated deficit (34,654,640)
------------
Total stockholders' equity 728,503
------------
Total liabilities,
mandatorily redeemable preferred stock
and stockholders' equity $ 57,136,333
============
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CTN MEDIA GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenue $ 8,831,381 $ 2,175,447 $13,871,234 $ 5,850,415
----------- ----------- ----------- -----------
Expenses
Operating 6,151,742 1,339,164 9,935,767 2,971,263
Selling, general and administrative 4,701,722 2,450,322 11,861,056 7,758,844
Depreciation and amortization 638,183 736,506 1,305,576 1,743,768
Total Expenses ----------- ----------- ----------- -----------
11,491,647 4,525,992 23,102,399 12,473,875
----------- ----------- ----------- -----------
Interest Income (expense),net (172,209) 38,784 (112,846) 295,822
----------- ----------- ----------- -----------
Loss before income taxes and cumulative effect of change
in accounting principle (2,832,475) (2,311,761) (9,344,011) (6,327,638)
Cumulative effect of change in accounting principle - - - 140,044
------------ ----------- ------------ ------------
Net loss $ (2,832,475) $(2,311,761) $ (9,344,011) $(6,187,594)
============ =========== ============ ===========
Amortization of beneficial conversion feature on
mandatorily redeemable preferred stock (7,351,991) (7,351,991)
Dividends and accretion on mandatorily redeemable
preferred stock (6,448,443) - (6,448,443) -
------------ ----------- ------------ ------------
Net Loss available to common stockholders (16,632,909) (2,311,761) (23,144,445) (6,187,594)
============ =========== ============ ===========
Basic and diluted loss per common share
Loss before cumulative effect of change in accounting
principle $ (1.15) $ (.28) $ (1.61) $ (.79)
Cumulative effect of change in accounting principle - - .02
----------- ----------- ----------- -----------
Net Loss $ (1.15) $ (.28) $ (1.61) $ (.77)
=========== =========== ============ ===========
Weighted average number of common shares
outstanding (basic and diluted) 14,410,360 8,127,532 14,342,052 8,052,613
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CTN MEDIA GROUP, INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
--------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,344,011) $(6,187,594)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,305,216 1,743,768
Other non-cash amortization 37,625 -
Bad debt expense 149,006 -
Compensation from stock options 928,165 -
Cumulative effect of change in accounting principle - (140,044)
Fixed asset impairment loss - 122,207
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (4,302,252) (687,525)
Prepaid expenses 61,535 (237,267)
Other assets 59,030 (267,604)
Accounts payable 3,169,752 101,899
Accrued expenses 400,291 795,041
Deferred revenue 481,463 (236,252)
----------- -----------
Net cash used in operating activities (7,054,180) (4,993,371)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (3,839,808) (4,368,619)
Cash (paid for) acquired from acquisitions, net of cash received (30,436,680) 123,090
----------- -----------
Net cash used in investing activities (34,276,488) (4,491,709)
----------- -----------
Cash flows from financing activities:
Payments on notes payable and capital leases - (160,674)
Redemption of preferred stock - (5,809)
Net proceeds from issuance of common stock - 610,207
Proceeds from exercise of warrants and stock options 370,912 -
Net proceeds from borrowings 15,684,699 -
Net proceeds from issuance of mandatorily redeemable preferred
stock 18,863,634 -
------------ -----------
Net cash provided by (used in) financing activities 34,919,245 443,724
------------ -----------
Net decrease in cash and cash equivalents (6,411,423) (9,041,356)
Cash and cash equivalents, beginning of period 6,411,423 11,438,289
------------ -----------
Cash and cash equivalents, end of period - $ 2,396,933
</TABLE>
4
<PAGE>
CTN MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements (the
"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 December 31, 1998 included in the Annual
Report as filed on Form 10-KSB with the United States Securities and Exchange
Commission.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position as of September 30, 1999 and
the results of operations and of cash flows for the nine months ended September
30, 1999 and 1998.
The results of operations for the nine months ended September 30, 1999 and
1998 are not necessarily indicative of the results of operations for a full
fiscal year of the Company. Certain prior period amounts have been reclassified
to conform with current period presentation.
NOTE (A) - The Company
- ----------------------
CTN Media Group, Inc., formally known as the College Television Network,
Inc. (the "Company"), owns and operates the College Television Network ("CTN"),
"Link Magazine", Sadler & Streib, and Armed Forces Communications, Inc., doing
business as Market Place Media, a wholly owned subsidiary ("MPM"). CTN is a
proprietary commercial television network operating on college and university
campuses, through single channel television systems placed free of charge
primarily in campus dining facilities and student unions. CTN generates revenue
from advertising displayed on the network. At September 30, 1999 and 1998, CTN
was installed or contracted for installation at approximately 1,387 and 553
locations, respectively, at various colleges and universities throughout the
United States. The Company believes CTN currently reaches a viewership of
approximately 1,500,000 daily impressions. Link Magazine is a publication
having a circulation in excess of one million students. Link Magazine is
distributed free of charge to more than 650 campuses nationwide. Sadler &
Streib is an Atlanta-based advertising agency primarily involved in placing
media buys and providing creative services for its clients. Link Magazine and
Sadler & Streib are included within the CTN operating segment.
During the current quarter, as discussed in Note (B), the Company purchased
MPM, a leading media placement company in the military, college, minority, and
senior markets. MPM provides one-stop shopping to both advertisers and
advertising agencies by providing media placement through print, broadcast,
promotional events and the Internet.
Certain of the Company's revenues are affected by the pattern of
seasonality common to most school-related businesses. Historically, the Company
has generated a significant portion of its revenue during the period from
September through May and substantially less revenue during the summer months
when colleges and universities do not hold regular classes.
NOTE (B) Acquisition
- --------------------
On August 31, 1999, the Company acquired all of the issued and outstanding
capital stock of MPM, (the "MPM Acquisition"). MPM has its primary place of
business in Santa Barbara, California. The Company paid $30,000,000, to the
shareholders of MPM ("MPM Shareholders"), subject to certain adjustments to be
made, if any, as defined in the stock purchase Agreement for the transaction.
5
<PAGE>
On the closing date of the MPM Acquisition, MPM borrowed $15,000,000 from a
financial institution (the "Term Loan") pursuant to a Credit Agreement dated
August 31, 1999, as discussed in Note (D). In addition, as discussed in Note
(C), on August 31, 1999, the Company received a $15,000,000 investment from U-C
Holdings, L.L.C ("Holdings"), the Company's majority shareholder. The Company
used the proceeds from the Term Loan and the investment by Holdings to pay the
purchase price to the MPM Shareholders. Of the $30,000,000 purchase price,
$2,500,000 is being held in escrow until a determination can be made by the
Company regarding adjustments to the purchase price, if any, and for
satisfaction of any post-closing claims against the MPM Shareholders.
The MPM Acquisition was accounted for under the purchase method of
accounting. The results of operations of MPM are included in the Company's
Consolidated Statement of Operations subsequent to the acquisition date which
was August 31, 1999. Intangible assets, consisting primarily of customer
relationships, tradenames/trademarks and goodwill of approximately $29 million
have been recorded in connection with the Company's preliminary purchase price
allocation and are being amortized on a straight line basis over 7 to 15 years.
The following unaudited pro forma financial information reflects the
results of operations for the nine months ended September 30, 1999 and the year
ended December 31, 1998, as if the MPM Acquisition had occurred on January 1,
1998. These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what operating results
would have been had the acquisition actually taken place on January 1, 1998 and
may not be indicative of future operating results. The unaudited pro forma
results are summarized as follows:
<TABLE>
<CAPTION>
Nine Months ended Year Ended
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Revenue $ 35,537,406 $ 38,259,659
Net loss from operations (10,541,251) (10,858,484)
Net loss available to common stockholders (10,541,251) (10,718,440)
Basic and diluted net loss per common share (.74) (1.12)
</TABLE>
Basic and diluted net loss per common share calculated above do not include
the effect of accretion or amortization of the beneficial conversion feature
associated with mandatorily redeemable preferred stock as such amount is not
calculable as of December 31, 1998. If accretion and beneficial conversion
feature amortization had been included at September 30, 1999 based upon amounts
actually recorded during the current period, the basic and diluted earnings per
share would have been $(1.70).
NOTE (C) Mandatorily Redeemable Preferred Stock
- -----------------------------------------------
Pursuant to a Purchase Agreement dated July 23, 1999 (the "Initial Purchase
Agreement") between the Company and Holdings, Holdings purchased 309,998 shares
of the Company's convertible preferred stock, $0.001 par value per share
("Convertible Preferred"), for a purchase price of $4,649,970. The proceeds were
used for general working capital purposes of the Company. The conversion ratio
of the Convertible Preferred is computed by multiplying the number of shares of
Convertible Preferred to be converted by the $15.00 per share purchase price and
dividing the result by the conversion price of the Convertible Preferred (the
"Conversion Price") then in effect with respect to such shares. On the date of
issuance, the Conversion Price was $6.854 (the 30-day average trading price of
the Common Stock listed on The Nasdaq SmallCap Market ("Average Trading
Price")). The market price of the Common Stock on July 23, 1999 was $7.25. In
accordance with the terms of the Initial Purchase Agreement, from the date of
issuance to and including the third anniversary of the date of issuance of the
Convertible Preferred, the Conversion Price was subject to adjustment if at the
end of a quarter the Average Trading Price of the Common Stock was less than the
Conversion Price then in effect; provided that, the Conversion Price
6
<PAGE>
could not be reduced below $2.75. The Convertible Preferred was voting stock on
an as-converted basis to Common Stock based upon the number of shares of Common
Stock the Convertible Preferred was convertible into on the date of issuance or
678,432 shares of voting stock. The Convertible Preferred accrued a cumulative
dividend of 12% per annum. Additionally, pursuant to the Initial Purchase
Agreement, the Company issued a Class D warrant (the "Class D Warrant") to
Holdings entitling Holdings to purchase 135,686 shares of Common Stock with an
initial exercise price of $6.854 per share subject to the same adjustment as
discussed above in connection with the Convertible Preferred.
Effective October 18, 1999, the Board of Directors and a majority of the
shareholders effectuated the modification and reclassification of the
Convertible Preferred into shares of Series A Convertible Preferred stock of the
Company, $.001 par value per share ("Series A Preferred"). This modification and
reclassification resulted in the elimination of the variable conversion price
feature outlined in the Initial Purchase Agreement and fixed the conversion
price at $4.50 per share. In addition, the Company and Holdings entered into a
Cancellation Agreement, effective August 31, 1999, whereby the Company
cancelled, for no additional consideration, the Class D Warrant. The
reclassification and warrant cancellation was undertaken in order for the
Company to have a single type of preferred stock outstanding.
Pursuant to a Purchase Agreement dated August 31, 1999, (the "Second
Purchase Agreement") between the Company and Holdings, Holdings purchased
1,000,000 shares of the Company's Series A Preferred for an aggregate purchase
price of $15,000,000. Proceeds to the Company, net of related issuance costs,
were $14,213,664. These proceeds were used to pay a portion of the purchase
price to the MPM Shareholders in connection with the MPM Acquisition.
The Conversion Price associated with the Series A Preferred is $4.50, which
was a 34.9% discount from the 30 day average market price of the Common Stock as
of August 31, 1999, the date of issuance. The market price of the Common Stock
on August 31, 1999 was $6.63. Currently, the Series A Preferred is non-voting
stock; however, after the effective date of a Schedule 14C Information Statement
to be sent to the stockholders of the Company in connection with the
ratification and approval of the issuance of the Series A Preferred, Holdings
will gain the right to vote the Series A Preferred on an as-converted basis to
Common Stock based upon the number of shares of Common Stock the Series A
Preferred was convertible into on the date of issuance (i.e., 3,333,333 shares).
The Series A Preferred accrues a cumulative dividend of 12% per annum.
The new equity issued to Holdings in the form of Convertible Preferred and
Series A Preferred has been recorded on the Balance Sheet of the Company net of
the value associated with the favorable conversion terms of each type of
security (the "Beneficial Conversion Feature"). The Beneficial Conversion
Feature is calculated as the difference between the conversion price of the
security and the market price of the Common Stock on the respective dates of
issuance. In connection with the Beneficial Conversion Feature associated with
each security, because these securities are immediately convertible, the amounts
ascribed to the Beneficial Conversion Feature have been immediately amortized
through charges to Stockholders' Equity and included as adjustments to arrive at
net loss available to common stockholders on the consolidated statement of
operations. The amortization of the Beneficial Conversion Feature associated
with the Convertible Preferred and the Series A Preferred was approximately
$270,000 and $7,080,000, respectively.
The Company recorded an additional charge against Stockholders' Equity of
approximately $6,448,443 to accrete these securities to their highest redemption
value as of September 30, 1999. This is the full amount the preferred stock
would be redeemable for as of September 30, 1999, based upon the Company's
closing stock price as of such date. Since the redemption value is the greater
of the original cost plus accrued dividends or the market value of the
underlying common stock at the time of redemption, as the Company's stock price
changes, the redemption value and this accretion will change; however, the
redemption value will never be less than original cost plus accrued dividends.
Although the
7
<PAGE>
Company is accreting the full redemption value, the preferred stock is not
redeemable until July 23, 2006.
Pursuant to the Second Holdings Purchase Agreement, if Holdings contributes
up to $6,000,000 in cash to the Company to repay the Term Loan discussed in Note
(D) in connection with certain guaranty agreements executed by Holdings, Willis
Stein & Partners, L.P. (the managing member of Holdings) ("Willis Stein") and
certain affiliates of Willis Stein, Holdings will receive up to an additional
400,000 shares of Series A Preferred. The maximum amount of the guarantee is
$6,000,000.
NOTE (D) - Debt
On July 26, 1999, the Company obtained a $12,000,000 revolving credit loan
(the "CTN Loan") from a financial institution for working capital purposes. A
condition to the CTN Loan was the $4,649,970 investment by Holdings discussed
in Note (C). The CTN Loan, as amended, is on a revolving credit basis and
requires the Company to obtain equity investments, from Holdings or other
investors, on a dollar-for-dollar basis for every dollar borrowed under the CTN
Loan up to the $12,000,000 credit limit, excluding the $4,659,976 previously
invested by Holdings. The CTN Loan bears interest at either (i) the Base Rate
which is equal to the greater of (a) the Federal Funds Rate plus 0.5% or (b) the
Prime Rate, plus 2.00% per annum; or (ii) the Eurodollar Rate, plus 3.50% per
annum. The CTN Loan is due and payable in full on December 29, 2000. There are
several financial and operating covenants in the loan agreement, including a
prohibition on dividends by the Company until the CTN Loan is paid in full. In
addition, it is a default under the CTN Loan if Holdings owns less than 51% of
the Company or certain members of Holdings are no longer members of the Board of
Directors of the Company. The CTN Loan is guaranteed by a negative pledge
agreement with outstanding shares of stock of the Company owned by Holdings.
On August 31, 1999, MPM obtained a $15,000,000 Term Loan ("Term Loan") and
a $2,000,000 revolving credit line ("Revolver Loan") from a separate financial
institution and its affiliates for the purchase of MPM by the Company. The Term
Loan was distributed in full by MPM to the Company to pay the MPM Shareholders
in the MPM Acquisition. MPM also borrowed $1,000,000 from the Revolver Loan to
pay expenses associated with the MPM Acquisition and certain loan costs.
Both the Term Loan and the Revolver Loan bear interest at either the
Alternate Base Rate which is the higher of the Prime Rate or the Federal Funds
Rate plus 0.5%, or the Eurodollar Base rate, which is the rate for a Eurodollar
Loan plus the applicable margin, which is variable depending on various
financial conditions set forth in the Credit Agreement. The Revolver Loan is
due and payable on September 30, 2004. Payments under the Term Loan are
payable quarterly commencing June 30, 2000, and is payable in full on September
30, 2004.
The Term Loan and Revolver Loan are secured by the assets of MPM and are
guaranteed by Holdings, Willis Stein and certain affiliates of Willis Stein.
Each of the Company, Holdings and Willis Stein entered into guaranty agreements
in favor of the financial institution dated August 31, 1999. The guaranty
agreements are conditional and limited to circumstances in which the Company
receives funds from Holdings to repay the financial institution. Additionally,
the Company entered into a Pledge Agreement with the financial institution,
dated August 31, 1999, whereby the Company pledged to the financial institution
the MPM capital stock it acquired in the MPM Acquisition.
8
<PAGE>
NOTE (E) - Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, 1999 Estimated useful lives
------------------ ----------------------
<S> <C> <C>
Entertainment systems completed 9,513,802 5 years
Entertainment systems in progress 134,877 N/A
Machinery and equipment 1,689,751 5 -7 years
Software 745,958 5 years
Furniture and Fixtures 829,012 7 years
Leasehold improvements 289,064 7-11 years
------------ ------------
$13,202,464
Less: Accumulated depreciation (2,696,128)
------------
Total $10,506,336
============
</TABLE>
Depreciation expense for the nine months ended September 30, 1999 and the nine
months ended September 30, 1998 was approximately $1,102,012 and $1,743,768
respectively. The decrease in depreciation during the current year is a result
of the increased depreciation in the comparable period of the prior year in
connection with the accelerated depreciation taken on certain program equipment.
NOTE (F) - Commitments and Contingencies
- ----------------------------------------
The Company is currently utilizing Crawford Communications, Inc.
("Crawford") and Viatech International, Inc. to complete installations in new
locations. The Company has also entered into an Origination Services Contract
with Crawford. Both agreements provide for payments of approximately $3,960,000
over a five year period ending on July 15, 2003. In accordance with the
Origination Services Contract, Crawford is responsible for the transmission via
satellite of CTN's daily programming, including encoding signals, testing,
maintaining CTN's programming library, and obtaining programming from Turner
Private Networks, Inc. ("Turner") pursuant to the Company's programming
agreement with Turner, as well as other programming from other CTN sources.
Crawford is also responsible for the uplink of the programming to a satellite as
well as the downlink of the signal from the satellite at each installation site.
The Origination Services Contract has a five-year term. As of September 30,
1999, the Company has paid approximately $957,000 to Crawford pursuant to the
Origination Services Contract.
On March 21, 1998, the Company entered into a severance agreement with one
of its senior executives. The agreement provides for payments of approximately
$870,000 over a three year period ending in April, 2001. A provision for this
obligation is included in the Company's statement of operations for the fiscal
year ended December 31, 1998. As of September 30, 1999, the Company has paid
approximately $433,000 of this obligation.
On March 27, 1998, the Company signed an agreement with Turner to provide
news and sports programming on CTN through December 31, 2002. The total license
fee is approximately $2,900,000. This agreement supercedes the prior
programming agreement entered into on November 5, 1996. As of September 30,
1999, the Company has paid approximately $887,000 pursuant to this agreement.
In connection with the delivery platform conversion during 1998, the
Company entered into a Transponder Use Agreement with Public Broadcasting
Service ("PBS") on April 30, 1998. The Company has subleased capacity on a
satellite owned and operated by GE American Communications, Inc. ("GE") and
leased to PBS by GE. This agreement provides for payments of approximately
$3,924,000 over a five year period that terminates on July 31, 2003. The
Company has protected status on this satellite, where in the event of a
satellite failure or performance problem, the Company's
9
<PAGE>
programming will preempt transmissions of other users on this satellite or on
another satellite. As of September 30, 1999, the Company has paid approximately
$915,600 pursuant to this agreement.
In May, 1998, the Company entered into a lease for new space in New York
City. The New York operations of CTN and Link Magazine were consolidated in
this new office space, effective October 1, 1998. The lease term is for ten
(10) years and the initial annual rent in $249,900, subject to annual increases
based upon certain economic factors.
On February 19, 1999, the Company entered into a severance agreement with
one of its senior executives and former member of the Board of Directors. The
agreement provides for payments of approximately $476, 000 over a 26 month
period through April 2001. In conjunction with the severance agreement, the
Company also granted the officer an option to purchase 100,000 shares of the
Company's common stock at an exercise price of $2.75 per share. The options
vested immediately and expire five years from the date of the severance
agreement. In connection with the severance agreement, the Company recorded
charges of $436,300, representing the present value of the cash severance
payments and $240,000, representing the fair value of the stock options. As of
September 30,1999, the Company has paid approximately $128,000 under this
agreement.
On July 13, 1999, the Company entered into an agreement with Contemporary
Marketing Incorporated ("CMI") for the management of a sixteen week promotional
concert tour. The concert tour will run from the Fall of 1999 through the
Spring of 2000 on 25 college campuses nationwide. CTN has committed to pay
CMI's program costs of approximately $1,200,000 over that 16 week period.
NOTE (G) Comprehensive Income
- -----------------------------
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This standard
establishes new rules for reporting and display of comprehensive income and its
components. The adoption of this statement has no impact on the Company's net
loss or stockholders' equity. During fiscal 1999 and the prior periods
presented, total comprehensive income substantially equaled net loss.
NOTE (H) Segment Reporting
- --------------------------
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS No. 131"). This statement establishes new standards for the
manner in which companies report operating segment information as well as
disclosures about products and services and major customers. In connection with
the acquisition of MPM, management has re-evaluated the manner in which the
business is operated and reported. The Company currently has two reportable
segments as defined under SFAS No. 131: (i) CTN and (ii) MPM. Segment
information previously reported has been restated to conform to the current
presentation. See Note A for a description of the products and services
provided by each segment. The Company evaluates each segment's performance
based on income or loss before income taxes. Information regarding the
operations of these reportable segments are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues
CTN $ 8,076,058 $ 5,850,415 $ 3,036,205 $ 2,175,447
MPM 5,795,176 - 5,795,176 -
------------ ------------ ------------ ------------
Total $13,871,234 $ 5,850,415 $ 8,831,381 $ 2,175,447
------------ ------------ ------------ ------------
</TABLE> 10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Loss before income taxes
and cumulative
effect of change in
accounting principle
CTN (9,908,127) (6,327,638) (3,396,591) (2,311,761)
MPM 564,116 - 564,116 -
----------- ----------- ----------- -----------
Total $(9,344,011) $(6,327,638) $(2,832,475) $(2,311,761)
----------- ----------- ----------- -----------
September 30, 1999 September 30, 1998
Total Assets
CTN 27,865,943 10,267,424
MPM 29,270,390 -
----------- -----------
Total $57,136,333 $10,267,424
----------- -----------
</TABLE>
Substantially all of the property and equipment owned by the Company is used in
the operations of CTN.
NOTE (I) Subsequent Events
- --------------------------
On October 8, 1999, the Company issued to Holdings 33,333 shares of Series
A Preferred, for $15.00 per share or an aggregate purchase price of
approximately $500,000, pursuant to the Second Purchase Agreement. On October
18, 1999, Holdings purchased an additional 153,334 shares of Series A Preferred,
for $15.00 per share or an aggregate purchase price of approximately $2,300,000
pursuant to an Amended and Restated Purchase Agreement("Amended Second Purchase
Agreement"), between the Company and Holdings. The purpose of Holdings'
purchase of these shares was to enable the Company to raise $2,800,000 in gross
proceeds for the Company's working capital needs and capital expenditures and to
enable the Company to make a possible future investment in another entity
strategic to its business. In connection with this $2,800,000 equity investment
in the Company by Holdings, the Company was able to borrow $2,800,000 under the
CTN Loan on October 21,1999.
As of the balance sheet date, the Amended Second Purchase Agreement further
provides that the Company has the right to require Holdings to purchase, subject
to various conditions, certain of which are at the discretion of Holdings, up to
an additional 800,000 shares of Series A Preferred for an aggregate purchase
price of approximately $12,000,000. This right expires on August 31,2000. As
discussed above, as of October 18, 1999, the Company has issued 186,667 of the
800,000 shares.
The obligation of Holdings to purchase Series A Preferred at subsequent
dates is conditioned upon the Company providing certain information to Holdings
and Holdings' satisfaction, in its sole discretion, with the Company's ability
to meet certain other conditions. In the event the Company cannot satisfy these
conditions and Holdings elects not to provide additional funding to the Company,
the Company's ability to meet its obligations and continue its expansion will be
impaired. However, Willis Stein, has committed to provide sufficient funds to
Holdings to enable Holdings to infuse working capital into the Company during
1999 to fund cash flow deficits, if any. Based on this commitment, the Company
believes Holdings will provide this additional funding.
On October 13, 1999, the Company organized a subsidiary called Wetair.com,
L.L.C. ("WetAir") which will develop and operate a proprietary internet site for
the Company by the name of Wetair.com. As of the formation date, the Company
owns 90% of the outstanding stock and Wetair will operate as a subsidiary of the
Company. The Company has entered into an Interactive Services Agreement with
THINK New Ideas, Inc. ("THINK"). THINK has been contracted to design and manage
services relating to the Company website and Wetair.com. The project is
estimated to cost approximately $500,000 through the end of 1999.
11
<PAGE>
NOTE (J) Restatement of Third Quarter 1999 Results
- --------------------------------------------------
We have restated our consolidated financial statements for the three and
nine months ended September 30, 1999 to revise amounts previously reported as
net loss available to Common Stockholders and basic and diluted loss per Common
Share.
Initially, the Company determined that certain amounts (the amount of
the Beneficial Conversion Feature) should be used to offset or reduce the
accretion of the Convertible Preferred and Series A Preferred to their highest
redemption values for purposes of calculating the net loss available to Common
Stockholders. Upon further analysis of the accounting rules, the Company has
revised the manner in which it originally accounted for the accretion of the
Convertible Preferred and Series A Preferred to their highest redemption value.
As a result, the Company has fully amortized the value ascribed to the
Beneficial Conversion Features of the respective securities in the amount of
$7,351,991 and has accreted the mandatorily redeemable securities to their
highest redemption value through an accretion charge of $6,448,443 as of
September 30, 1999. Due to this revision, net loss available to common
stockholders has increased to $16,632,909 from $10,725,233 and basic and diluted
loss per common share has increased to $(1.15) from $(.74).
Item 2. Management's Discussion and Analysis or Plan of Operation.
Forward-Looking Statements
Certain forward-looking information contained in this Quarterly Report is
being provided in reliance upon the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 as set forth in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such information includes, without limitation,
discussions as to estimates, expectations, beliefs, plans, strategies and
objectives concerning the Company's future financial and operating performance.
Such forward-looking information is subject to assumptions and beliefs based on
current information known to the Company and factors that could yield actual
results differing materially from those anticipated. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in future
operating results. Please see Exhibit 99.1 "Safe Harbor Compliance Statement
for Forward-Looking Statements" for additional factors to be considered by
shareholders and prospective shareholders.
Overview
The Company commenced operations in January 1991. The Company owns and
operates CTN, Link Magazine, Sadler & Streib and MPM. CTN is a proprietary
commercial television network that operates on college and university campuses
through single-channel television systems placed free of charge primarily in
campus dining facilities and student unions. At September 30, 1999, CTN was
installed or contracted for installation at approximately 1,387 locations at
various colleges and universities throughout the United States. The Company
believes CTN currently reaches a viewership of approximately 1,500,000 daily
impressions.
The Company also owns and publishes Link Magazine, a publication having an
approximate circulation in excess of one million students. Link Magazine is
distributed free of charge to more than
12
<PAGE>
650 campuses nationwide. In addition, the Company owns Sadler & Streib, an
Atlanta-based advertising agency primarily involved in placing media buys and
providing creative services for its clients.
On August 31, 1999, the Company acquired all of the outstanding stock of
MPM in exchange for $30,000,000. MPM is a leading media placement company in
the military, college, minority, and senior markets. MPM is increasing its
presence in the high school, alternative lifestyles, and local consumer markets
among others. The results of operations of MPM are included in the Consolidated
Statement of Operations of the Company subsequent to the purchase date. The
Company financed the $30 million purchase price and related acquisition costs
through the issuance of $15,000,000 of Series A Preferred to Holdings, the
Company's majority stock shareholder, and the incurrence of $15,000,000 of bank
debt. See Notes (B), (C) and (D) of "Item 1. Financial Statements" for further
discussion.
Certain of the Company's revenue is affected by the pattern of seasonality
common to most school-related businesses. Historically, the Company has
generated a significant portion of its revenue during the period of September
through May and substantially less revenue during the summer months when
colleges and universities do not hold regular classes.
Results of Operations
The following table sets forth certain financial data derived from the
Company's statement of operations for the nine months ended September 30, 1999
and September 30, 1998:
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 September 30, 1998
----------------------------------------------------------------
% of % of
$ Revenue $ Revenue
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue............................................. 8,831,381 100 2,175,447 100
Operating expenses.................................. 6,151,742 72 1,339,164 62
Selling, general and administrative................. 4,701,722 53 2,450,322 113
Depreciation and amortization....................... 638,183 7 736,506 34
Interest income (expense), net...................... (172,209) 2 38,784 2
Loss before cumulative effect of change in
accounting principle.............................. 2,832,475 32 2,311,761 106
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 September 30, 1998
----------------------------------------------------------------
% of $% of
$ Revenue $ Revenue
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue........................................... 13,871,234 100 5,850,415 100
Operating expenses................................ 9,935,767 73 2,971,263 51
Selling, general and administrative............... 11,861,056 86 7,758,844 133
Depreciation and amortization..................... 1,305,576 9 1,743,768 30
Interest income................................... (112,846) 1 295,822 5
Loss before cumulative effect of change in
accounting principle............................ 9,344,011 67 6,327,638 108
</TABLE>
Revenue increased to $8,831,381 and $13,871,234 for the three and nine
month periods ended September 30, 1999, versus $2,175,447 and $5,850,415 for the
comparable periods in the prior year. The primary source for the revenue
increase was derived from the acquisition of MPM in August 1999 and Sadler &
Streib in July 1998. Furthermore, advertising sales for Link Magazine increased
due to the publication of one additional issue and increased advertisers for the
period ended September 30, 1999. During the current quarter, Network advertising
revenues were flat in comparison with the comparable period in the prior year;
however, on a year-to-date basis, CTN revenue has increased approximately 5%.
13
<PAGE>
The Company anticipates that it will experience continued sales growth at CTN
throughout the fiscal year ending December 31, 1999 by continuing to expand its
advertiser base and by increasing the rates charged for its advertising spots to
reflect an 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 from the Company, or
that future significant advertising revenue will ever be generated. Failure to
significantly increase advertising revenue could have a material impact on the
operations of the Company.
Operating expenses increased to $6,151,742 and $9,935,767, respectively,
for the three and nine-month periods ended September 30, 1999, as compared to
$1,339,164 and $2,971,263 for the comparable periods in the prior year. The
increase over the comparable prior year period is primarily attributable to
costs relating to MPM and the advertising agency business with no corresponding
amount for the prior year and the first two quarters of 1998, respectively, as
MPM was acquired in August 1999 and the agency was acquired in July 1998.
Publishing costs associated with producing larger and higher quality issues of
Link Magazine also account for a portion of the increase. The increase over the
prior year also reflects additional costs incurred at CTN for improved network
programming and satellite transmission expenses.
Selling, general and administrative expenses increased to $4,701,722 and
$11,861,056, respectively, for the three and nine-month periods ended September
30, 1999, versus $2,450,322 and $7,758,844 for the comparable periods in the
prior year. The increase is primarily attributable to increased marketing,
research and expanded sales efforts associated with CTN and the acquisition of
MPM. Additionally, due to the accelerated ramp-up of affiliate locations of
CTN, payroll and related higher commission expenses were recognized.
Depreciation and amortization expense totaled $638,183 and $1,305,576 for
the three and nine-month periods ended September 30, 1999, as compared to
$736,506 and $1,743,768 for the comparable periods in the prior year. The
decrease in depreciation expense is directly related to the acceleration of
depreciation on system equipment recorded in June of 1998 in connection with the
conversion of the network delivery platform to the Digital Video Broadcast
system ("DVB").
Interest income (expense) amounted to ($172,209) and $(112,846) for the
three and nine-month periods ended September 30, 1999, versus $38,784 and
$295,822 for the comparable periods in the prior year. The decrease in interest
income is attributable to the Company's lower cash position as a result of
expenditures directly at CTN related to the equipment required for the increased
number of installed affiliate locations coupled with one month of interest
expense recorded for the loans in conjunction with the purchase of MPM.
The Company has incurred substantial losses since commencement of its
operations and anticipates that such losses will continue through the remainder
of 1999. The net loss before the cumulative effect of a change in accounting
principle amounted to $2,832,475 and $9,344,011 for the three and nine-month
periods ended September 30, 1999, versus $2,311,761 and $6,327,638 for the
comparable periods in the prior year. The net loss during the respective
periods for the quarter reflects the Company's continued efforts to expand its
advertiser and affiliate bases.
Financial Condition and Liquidity
At September 30, 1999, the Company had working capital of $26,985. Cash
used in operations increased to $7,061,306 during the nine-months ended
September 30, 1999, from $4,993,371 for the comparable period in the prior year.
The impact of an increased loss and increasing accounts receivable was offset by
a build up of accounts payable. The Company has obtained an equity infusion
from Holdings and a credit facility from a lending institution to fund current
working capital needs. Additionally, the Company has obtained a commitment from
Willis Stein to fund cash flow deficits, if any, through December 31, 1999. See
Notes (C) and (D) of "Item 1 Financial Statements", for further discussion of
transactions.
14
<PAGE>
Acquisitions and purchases of property and equipment increased to
$34,269,362 during the nine-months ended September 30, 1999 from $4,491,709 for
the comparable period in the prior year due primarily to the purchase of MPM on
August 31, 1999.
Cash provided by financing activities was $34,919,245 for the nine- months
ended September 30, 1999, compared to cash provided by financing of $443,724 for
the same period in the prior year. The majority of the proceeds came from the
issuance of $4,600,000 of Convertible Preferred Stock, $15,000,000 Series A
Convertible Preferred Stock, and the increase of $15,500,000 of bank debt. See
Notes (C) and (D) of "Item 1. Financial Statements" for further discussion.
The Company has incurred substantial losses since commencement of its
operations and anticipates that such losses will continue through December 31,
1999. In order to reach the stage where the Company is profitable, it is
expected that additional expenditures will be required to increase the affiliate
base and to more aggressively market CTN to attract more advertisers.
Year 2000
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, those date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, prior to
December 31, 1999, computer systems and/or software used by many companies may
need to be upgraded to comply with such "Year 2000" requirements. The Company
relies on computer applications provided by third parties to deliver and track
its programming on CTN as well as to manage and monitor its accounting,
advertising sales and administrative functions. Because the Company is
dependent on vendor compliance, its ability to assure Year 2000 compliance is
limited. The Company has obtained representations from its most significant
computer system and software vendors that the services and products provided
are, or will be, Year 2000 compliant, with the exception that it has not
obtained any such representations from Public Broadcasting Service under its
Transponder Use Agreement, dated April 30, 1998. The Company has obtained
insurance for certain of the costs associated with a failure of the satellite
transmission equipment upon which CTN's programming delivery is based, including
the cost of redirecting satellite dishes, securing a new satellite transponder,
and lost advertising revenue resulting from an interruption in programming.
However, this business interruption insurance would not cover all costs
associated with a satellite failure. Despite the Company's efforts to address
the Year 2000 impact on its business operations and internal systems, there can
be no assurance that such impact will not result in a material disruption of its
business or have a material adverse effect on the Company's business, financial
condition or results of operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No events occurred during the quarter covered by this Report that would
require a response to this Item. See Note F "Subsequent Events" as to the
issuance of convertible preferred stock of the Company.
Item 2. Changes in Securities.
(a) On July 23, 1999, the Company sold 309,998 shares of Convertible
Preferred to the Company's majority shareholder, Holdings, for a per share price
of $15.00, or an aggregate purchase price of $4,649,970. Pursuant to Section
4(2) and Rule 506 of the Securities Act of 1933 (the "Act"), this sale of
securities by the Company to one accredited investor (as defined in Rule 501(a))
was exempt from registration. The proceeds were used for general working
capital purposes of the Company. The conversion ratio of the Convertible
Preferred is computed by multiplying the number of shares of Convertible
Preferred to be converted by the $15.00 per share purchase price and dividing
the result by
15
<PAGE>
the conversion price of the Convertible Preferred (the "Conversion Price") then
in effect with respect to such shares. On the date of issuance, the Conversion
Price was $6.854 (the 30-day average trading price of the Common Stock listed on
The Nasdaq SmallCap Market ("Average Trading Price")). From the date of issuance
to and including the third anniversary of the date of issuance of the
Convertible Preferred, the Conversion Price was subject to adjustment if at the
end of a quarter the Average Trading Price of the Common Stock was less than the
Conversion Price then in effect; provided that, the Conversion Price could not
be reduced below $2.75, as adjusted for stock splits, stock dividends and other
similar events. The Convertible Preferred was voting stock on an as-converted
basis to Common Stock based upon number of shares of Common Stock the
Convertible Preferred was convertible into on the date of issuance or 678,432
shares of voting stock. The Convertible Preferred accrued a cumulative dividend
of 12% annum.
The Convertible Preferred shares issued to Holdings, as discussed herein
above, were subsequently reclassified into shares of Series A Preferred on a
one-for-one basis as of the effective date (October 18, 1999) of the approval of
such reclassification by a majority of the shareholders. Thereafter, all
authorized but unissued shares of Convertible Preferred were redesignated by the
Board of Directors as Series A Preferred, and the Convertible Preferred is no
longer a designated series of the Company's preferred stock.
(b) On August 31, 1999, the Company sold 1,000,000 share of Series A
Preferred to Holdings for a per share price of $15.00, or an aggregate purchase
price of $15,000,000. Pursuant to Section 4(2) and Rule 506 of the Act, this
sale of securities by the Company to one accredited investor was exempt from
registration. The conversion ratio of the Series A Preferred is computed by
multiplying the number of shares of Series A Preferred to be converted by the
$15.00 per share purchase price and dividing the product by the conversion price
of the Series A Preferred (the "Series A Conversion Price") then in effect with
respect to such shares. On the date of issuance, the Series A Conversion Price
was $4.50. The Series A Preferred is currently non-voting stock; however, after
the effective date of the shareholder approval described in a Schedule 14C
Information Statement to be sent to the stockholders of the Company in
connection with the ratification and approval of the issuance of the Series A
Preferred, Holdings will obtain the right to vote its shares of Series A
Preferred as if such shares were converted into shares of Common Stock on the
date of issuance which equals 3,333,333 voting shares. The Convertible
Preferred accrued a cumulative dividend of 12% annum. The conversion ratio and
voting rights of the Series A Preferred could cause dilution in the voting power
of the common stockholders.
Item 3. Defaults Upon Senior Securities.
No events occurred during the quarter covered by this Report that would
require a response to this Item.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On August 31, 1999, by written consent in lieu of a meeting, the
holder of a majority of the voting stock of the Company approved the Plan of
Reclassification and the Third Certificate of Designation of the Series A
Convertible Preferred Stock of the Company ("Third Certificate"). The majority
stockholder consent with respect to these matters took effect 20 days after the
mailing of a Schedule 14C Information Statement to the shareholders of the
Company. Both the Plan of Reclassification (filed as an Amendment to the
Certificate of Incorporation) and the Third Certificate were filed with the
Secretary of State of Delaware and made effective as of October 18, 1999.
(b) On August 31, 1999, the holder of all of the outstanding preferred
stock of the Company, by written consent in lieu of a meeting, approved (i) a
reduction in the Company's authorized Convertible Preferred stock from 2,000,000
shares to 309,998 shares and (ii) the Plan of Reclassification discussed in Item
4(a) above.
16
<PAGE>
Item 5. Other Information.
No events occurred during the quarter covered by this Report that would
require a response to this Item.
Item 6. Exhibits and Reports on Form 8-K.
The following exhibits are filed with this Report:
<TABLE>
<CAPTION>
<S> <C>
Exhibit 3.1 Certificate of Designation, Powers, References and Rights of the Preferred
Stock of College Television Network, Inc. (incorporated by reference to
Exhibit 4.3 to Form 8-K filed (August 3, 1999).
Exhibit 3.2 Second Certificate of Designation, Powers, References and Rights of the Series
A Convertible Preferred Stock of College Television Network, Inc.
(incorporated by reference to Exhibit 5.3 to Form 8-K filed September 15,
1999).
Exhibit 3.3 Plan of Reclassification, dated August 31, 1999 (incorporated by reference to
Exhibit I to the Schedule 14C Information Statement filed by the Company on
September 22, 1999).
Exhibit 10.1 Stock Purchase Agreement, dated July 16, 1999, among the Company, Armed Forces
Communications, Inc., Kevin West and Colleen Gordon (incorporated by reference
to Exhibit 2.1 to Form 8-K filed September 15, 1999).
Exhibit 10.2 Purchase Agreement, dated as of July 23, 1999, between the Company and U-C
Holdings, L.L.C. (incorporated by reference to Exhibit 4.1 to Form 8-K filed
August 3, 1999).
Exhibit 10.3 Purchase Agreement, dated August 31, 1999, between the Company and U-C
Holdings, L.L.C. (incorporated by reference to Exhibit 5.1 to Form 8-K filed
September 15, 1999).
Exhibit 10.4 Cancellation Agreement, dated August 31, 1999, between the Company and U-C
Holdings, L.L.C. (incorporated by reference to Exhibit 5.2 to Form 8-K filed
September 15, 1999).
Exhibit 10.5 Interactive Services Agreement, dated as of September 27, 1999, between the
Company and THINK New Ideas, Inc. (incorporated by reference to Exhibit 10 to
Form 10-QSB filed November 15, 1999).
Exhibit 10.6 Agreement, dated as of September 22, 1999, between the Company and
Contemporary Marketing Inc. (incorporated by reference to Exhibit 10 to
Form 10-QSB filed November 10, 1999).
Exhibit 10.7 Amended and Restated Purchase Agreement, dated as of October 18, 1999, between
the Company and U-C Holdings, L.L.C. (incorporated by reference to Exhibit
5.1 to Form 8-K filed October 27, 1999).
Exhibit 10.8 Employment Agreement, dated as of July 16, 1999, between the Company and
Geoffrey Kanter (incorporated by reference to Exhibit 10.8 to Form 10-QSB
filed November 15, 1999).
Exhibit 27.1 Financial Data Schedule (incorporated by reference to Form 10-QSB filed
November 15, 1999).
Exhibit 99.1 Safe Harbor Compliance Statement for Forward Looking Statements (incorporated by
reference to Form 10-QSB filed November 15, 1999).
</TABLE>
17
<PAGE>
(b) Reports on Form 8-K.
A report on Form 8-K dated August 3, 1999 disclosed (i) the MPM
Acquisition, (ii) the $12,000,000 revolving credit line and (iii) the issuance
of 309,998 shares of Convertible Preferred and the Class D Warrant to Holdings.
A report on Form 8-K dated September 15, 1999 disclosed (i) the closing of
the MPM Acquisition, (ii) the $15,000,000 Term Loan and $2,000,000 Revolver
Loan, (iii) issuance of 1,000,000 shares of Series A Preferred to Holdings, plus
the guaranty commitment by Willis Stein & Partners, L.P. and its affiliates,
(iv) the cancellation of the Class D Warrant, and (v) the Plan of
Reclassification of the Convertible Preferred.
18
<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.
CTN MEDIA GROUP, INC.
Registrant
/s/ Jason Elkin
Date: March 30, 2000 -------------------------------------------------
Jason Elkin
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
/s/ Patrick Doran
Date: March 30, 2000 ------------------------------------------------
Patrick Doran
Chief Financial Officer, Secretary and Treasurer
(Principal Accounting and Financial Officer)
19
