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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549**

**FORM10-Q**

**[Mark One]**
| ý | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES**  |
|--------|--------------------------------------------------------------------------|
|   | **EXCHANGE ACT OF 1934**                                                 |
|   |                                                                     |
|   | **For the quarterly period ended June 30, 2001**                         |
|   |                                                                     |
|   | **OR**                                                                   |
|   |                                                                     |
| o      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES** |
|   | **EXCHANGE ACT OF 1934**                                                 |

** **

**For the transition period from______________ to ____________**

**CommissionFile Number:  0-19997**

**CTNMEDIA GROUP, INC.******(Exact Name of Registrant as Specified inIts Charter)

 

| **Delaware**                                                    | **13-3557317**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) | (I.R.S. Employer  Identification No.) |
|                                                            |                                  |
| **3350 Peachtree Rd. Suite 1500****Atlanta,  Georgia**          | **30326**                             |
| (Address of Principal  Executive Offices)                       | (Zip Code)                            |

** **

Issuer’s Telephone Number, Including Area Code:**  (404) 256-9630**

|                                                  |
|-------------------------------------------------------|
| **N/A**                                               |
|                                                       |
| (Former Name, Former  Address and Former Fiscal Year, |
| if Changed Since Last  Report)                        |
|                                                  |

Check whether theissuer:  (1) filed all reports requiredto be filed by Section 13 or 15(d) of the Exchange Act during the past 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.    Yes ý  No o

Number of shares ofcommon stock outstanding as of August 8, 2001: 15,086,747

Transitional SmallBusiness Disclosure Format (check one): Yes o    No ý

----

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PARTIFINANCIAL INFORMATION

ITEM 1. Financial Statements

CTN MEDIA GROUP, INC.CONSOLIDATED BALANCE SHEET(Unaudited)

ASSETS

|                                                | June 30,  2001                                                                                                                  |        | December 31,  2000    |        |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------|-----------------------|-------------|
|                                                |                                                                                                                                 |        |                       |        |
| Current  assets:                                    |                                                                                                                            |        |                  |        |
|                                                | Cash  and cash equivalents                                                                                                      | $           | 1,926,498             |        | $ | 2,806,919 |   |
|                                                | Accounts  receivable, net of allowance of $451,349 and $575,455, respectively                                                   | 2,008,903   |             | 5,374,456   |      |
|                                                | Prepaid  expenses                                                                                                               | 197,634     |                  | 281,794     |   |
|                                                | Other  current assets                                                                                                           | 5,483       |                  | 31,431      |   |
|                                                |                                                                                                                                 |        |                       |        |
|                                                | Total  current assets                                                                                                           | 4,138,518   |                  | 8,494,600   |   |
|                                                |                                                                                                                            |        |                  |        |
| Investments                                         | 1,500,000                                                                                                                       |        | 1,500,000             |        |
| Property  and equipment, net                        | 11,481,743                                                                                                                      |        | 12,497,308            |        |
| Other  assets                                       | 356,864                                                                                                                         |        | 520,556               |        |
| Net  assets of discontinued operation               | 5,920,747                                                                                                                       |        | 7,550,565             |        |
|                                                |                                                                                                                                 |        |                       |        |
|                                                | Total  assets                                                                                                                   | $           | 23,397,872            |        | $ | 30,563,029 |   |
|                                                |                                                                                                                                 |        |                       |        |
|                                                |                                                                                                                            |        |                  |        |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|                                                |                                                                                                                            |        |                  |        |
| Current  liabilities:                               |                                                                                                                            |        |                  |        |
|                                                | Accounts  payable                                                                                                               | $           | 1,411,118             |        | $ | 2,283,110 |   |
|                                                | Accrued  expenses                                                                                                               | 649,713     |                  | 1,738,582   |   |
|                                                | Deferred  revenue                                                                                                               | 179,163     |                  | -           |   |
|                                                | Current  portion of long-term debt                                                                                              | 12,000,000  |                  | 12,000,000  |   |
|                                                |                                                                                                                                 |        |                       |        |
|                                                | Total  liabilities                                                                                                              | 14,239,994  |                  | 16,021,692  |   |
| Redeemable  preferred stock                         | -                                                                                                                               |        | 38,306,052            |        |
| Stockholders’  equity (deficit):               |                                                                                                                            |        |                  |        |
|                                                | Common  stock - $.005 par; authorized 50,000,000 shares; issued and outstanding  15,086,747 and 15,059,114 shares, respectively | 75,434      |             | 75,296      |      |
|                                                |                                                                                                                            |        |                  |        |
|                                                | Preferred  stock - $.001 par; authorized 2,776,666 shares; issued and outstanding  2,443,330 and 2,176,664 shares, respectively | 42,533,874  |        | -           |        |
|                                                |                                                                                                                            |        |                  |        |
|                                                | Additional  paid in capital                                                                                                     | 41,349,407  |                  | 41,780,424  |   |
|                                                | Unearned  compensation                                                                                                          | (108,123    | )                     | (172,035    | ) |
|                                                | Accumulated  deficit                                                                                                            | (74,692,714 | )                     | (65,448,400 | ) |
|                                                |                                                                                                                                 |        |                       |        |
|                                                | Total  stockholders’ equity (deficit)                                                                                      | 9,157,878   |                  | (23,764,715 | ) |
|                                                |                                                                                                                            |             |                  |             |   |
|                                                | Total  liabilities and stockholders’ equity (deficit)                                                                      | $           | 23,397,872            |        | $ | 30,563,029 |   |
|                                                |                                                                                                                                 |        |                       |        |
|                                                     |                                                                                                                                 |             |                       |             |  |  |  |  |  |

The accompanying notes are an integral partof the consolidated financial statements.

 

CTNMEDIA GROUP, INC.CONSOLIDATED STATEMENT OF OPERATIONS(Unaudited)

|                                                          | Three Months Ended  June 30,                                         |           | Six Months Ended  June 30, |           |
|---------------------------------------------------------------|----------------------------------------------------------------------|----------------|----------------------------|----------------|
|                                                          |                                                                 |           |                       |           |   |   |   |   |
|                                                          | 2001                                                                 |           | 2000                       |           | 2001 |   | 2000 |   |
|                                                          |                                                                      |           |                            |           |  |   |  |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Revenue                                                       | $                                                                    | 3,407,876      |                       | $              | 3,076,776 |   | $ | 6,370,869 |   | $ | 7,801,803 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Expenses                                                      |                                                                 |           |                       |           |   |   |   |   |
|                                                          | Operating                                                            | 2,013,500      |                       | 2,543,177      |   | 4,093,101 |   | 5,153,601 |   |
|                                                          | Selling,  general and administrative                                 | 3,917,548      |                       | 5,163,819      |   | 7,736,534 |   | 10,253,380 |   |
|                                                          | Depreciation  and amortization                                       | 1,125,613      |                       | 921,201        |   | 2,010,718 |   | 1,558,378 |   |
|                                                          |                                                                      |           |                            |           |  |   |  |   |
|                                                          | Total  expenses                                                      | 7,056,661      |                       | 8,628,197      |   | 13,840,353 |   | 16,965,359 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
|                                                          | Interest  income                                                     | 23,144         |                       | 43,638         |   | 42,928 |   | 125,937 |   |
|                                                          | Interest  expense                                                    | (319,018       | )                          | (276,262       | ) | (681,336 | ) | (490,023 | ) |
|                                                          |                                                                 |                |                       |                |   |  |   |  |   |
|                                                          | Net  loss from continuing operations                                 | (3,944,659     | )                          | (5,784,045     | ) | (8,107,892 | ) | (9,527,642 | ) |
|                                                          | Loss  from discontinued operations, net                              | (757,673       | )                          | (714,797       | ) | (1,136,436 | ) | (1,132,956 | ) |
|                                                          |                                                                 |                |                            |                |  |  |  |  |   |
|                                                          | Net  loss                                                            | $              | (4,702,332                 | )              | $ | (6,498,842 | ) | $ | (9,244,328 | ) | $ | (10,660,598 | ) |
|                                                          |                                                                      |           |                            |           |  |   |  |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Dividends  and accretion on  redeemable preferred  stock | -                                                                    |           | 5,765,272                  |           | - |   | 30,473,580 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Net  income (loss) available to common stockholders           | $                                                                    | (4,702,332     | )                          | $              | (733,570 | ) | $ | (9,224,328 | ) | $ | 19,812,982 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Net  income (loss) per share:                                 |                                                                 |           |                       |           |   |   |   |   |
|                                                          | Basic  net income (loss) per common share from continuing operations | (0.26          | )                     | -              |      | (0.54 | )  | 1.42 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |   |
|                                                          | Discontinued  operation                                              | (0.05          | )                          | (0.05          | ) | (0.07 | ) | (0.08 | ) |
|                                                          |                                                                 |                |                       |                |   |  |   |  |   |
|                                                          | Basic  net income (loss) per common share                            | (0.31          | )                          | (0.05          | ) | (0.61 | ) | 1.34 |   |
|                                                          |                                                                 |                |                       |                |   |  |   |  |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |   |
|                                                          | Diluted  net income (loss) per common share                          |           |                       |           |   |   |   |   |   |
|                                                          | from  continuing operations                                          | (0.26          | )                          | -              |   | (0.54 | ) | 0.92 |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |   |
|                                                          | Discontinued  operations                                             | (0.05          | )                          | (0.05          | ) | (0.07 | ) | (0.05 | ) |
|                                                          |                                                                 |                |                       |                |   |  |   |  |   |
|                                                          | Diluted  net income (loss) per common share                          | $              | (0.31                      | )              | $ | (0.05 | ) | $ | (0.61 | ) | $ | 0.87 |   |
|                                                          |                                                                      |           |                            |           |  |   |  |   |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
| Weighted  average number of common shares outstanding         |                                                                 |      |                       |      |   |      |   |      |
|                                                          |                                                                 |           |                       |           |   |   |   |   |
|                                                          | Basic                                                                | 15,086,747     |                       | 14,866,596     |   | 15,080,856 |   | 14,790,458 |   |
|                                                          | Potential  diluted                                                   | 15,086,747     |                       | 14,866,596     |   | 15,080,856 |   | 22,713,877 |   |
|                                                          |                                                                      |           |                            |           |  |   |  |   |
|                                                               |                                                                      |                |                            |                |  |  |  |  |  |  |  |  |  |  |

The accompanying notes are an integral part of the consolidated financialstatements.

 

CTNMEDIA GROUP, INC.CONSOLIDATEDSTATEMENT OF CASH FLOWS(Unaudited)

|                                   | Six Months Ended  June 30,                                                   |       |
|----------------------------------------|------------------------------------------------------------------------------|------------|
|                                   | 2001                                                                         |       | 2000 |   |
|                                   |                                                                              |       |  |   |
| Cash  flows from operating activities: |                                                                         |       |   |   |
|                                   | Net  loss from continuing operations                                         | $          | (8,107,892 | ) | $ | (9,527,642 | ) |
|                                   | Adjustments  to reconcile net loss to net cash used in operating activities: |       |      |   |      |
|                                   | Depreciation  and amortization                                               | 2,010,719  |   | 1,558,378 |   |
|                                   | Amortization  of debt issuance costs                                         | 60,000     |   | 79,749 |   |
|                                   | Non-cash  compensation expense arising from equity awards                    | 63,912     |   | 374,464 |   |
|                                   | Loss  on disposition of fixed assets                                         | 61,043     |   | (51,385 | ) |
|                                   |                                                                         |       |   |   |
|                                   | Changes  in operating assets and liabilities:                                |       |   |   |   |
|                                   | Accounts  receivable                                                         | 3,365,553  |   | 1,168,037 |   |
|                                   | Prepaid  expenses                                                            | 84,160     |   | (152,364 | ) |
|                                   | Other  assets                                                                | (93,885    | ) | (129,473 | ) |
|                                   | Accounts  payable                                                            | (871,978   | ) | (642,193 | ) |
|                                   | Accrued  expenses and other liabilities                                      | (1,088,869 | ) | (874,486 | ) |
|                                   | Deferred  revenue                                                            | 179,163    |   | (37,456 | ) |
|                                   |                                                                              |       |  |   |
|                                   | Net  cash used in operating activities                                       | (4,338,074 | ) | (8,234,371 | ) |
|                                   |                                                                         |       |   |   |
|                                   | Cash  flows from investing activities:                                       |       |   |   |   |
|                                   | Purchases  of property and equipment                                         | (832,672   | ) | (3,434,402 | ) |
|                                   |                                                                              |       |  |   |
|                                   | Net  cash used in investing activities                                       | (832,672   | ) | (3,434,402 | ) |
|                                   |                                                                              |       |  |   |
|                                   |                                                                         |       |   |   |
|                                   | Cash  flows from financing activities:                                       |       |   |   |   |
|                                   | Repurchase  of equity instruments                                            | -          |   | (275,000 | ) |
|                                   | Net  proceeds from line of credit                                            | -          |   | 7,000,000 |   |
|                                   | Proceeds  from exercise of warrants and stock options                        | 57,146     |   | 1,130,299 |   |
|                                   | Net  proceeds from issuance of preferred stock                               | 3,739,797  |   | - |   |
|                                   |                                                                         |            |   |  |   |
|                                   | Net  cash provided by financing activities                                   | 3,796,943  |   | 7,855,299 |   |
|                                   |                                                                              |       |  |   |
|                                   |                                                                         |       |   |   |
|                                   | Net  cash used in continuing operations                                      | (1,373,803 | ) | (3,813,474 | ) |
|                                   | Net  cash provided by (used in) discontinued operations                      | 493,382    |   | (492 | ) |
|                                   |                                                                         |            |   |  |   |
|                                   | Net  decrease in cash and cash equivalents                                   | (880,421   | ) | (3,813,966 | ) |
|                                   | Cash  and cash equivalents, beginning of period                              | 2,806,919  |   | 7,031,592 |   |
|                                   |                                                                         |            |   |  |   |
|                                   | Cash  and cash equivalents, end of period                                    | $          | 1,926,498 |   | $ | 3,217,626 |   |
|                                   |                                                                              |       |  |   |
|                                        |                                                                              |            |  |  |  |  |  |  |  |

The accompanying notes are an integral part of the consolidated financialstatements.

 

CTN MEDIA GROUP, INC.

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

             Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with generally accepted accounting principles for interim financialinformation and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotesrequired by generally accepted accounting principles for complete financialstatements.  These financial statementsshould be read in conjunction with the Company’s financial statements for thefiscal year ended December 31, 2000 included in the Annual Report as filed onForm 10-KSB with the United States Securities and Exchange Commission.

             Inthe opinion of management, the accompanying unaudited consolidated financialstatements contain all adjustments (consisting of normal recurring accruals)necessary to present fairly the financial position of the Company as of  June 30, 2001 and the results of operationsand of cash flows for the three and six months ended June 30, 2001 and 2000.

             Theresults of operations for the three and six months ended June 30, 2001 and 2000are not necessarily indicative of the results of operations for a full fiscalyear of the Company.  Certain priorperiod amounts have been reclassified to conform with the current periodpresentation and to reflect the operations of our former subsidiary, MarketPlace Media (“MPM”), as discontinued operations.

 

**NOTE (A) - The Company**

             CTN Media Group, Inc. andsubsidiaries (the “Company”) is a targeted media company specializing inreaching young adults.  As ofJune 30, 2001, the Company operated properties in network television,publishing, online media, specialty media placement and marketing.

             During the quarter endedJune 30, 2001, the Company operated as two reportable segments: CTN andMPM.  CTN includes the operations of theCollege Television Network (the “Network”), Link Magazine, iD8 Marketing(“iD8”) and Wetair.com.

             The Network is a satellitetelevision network that operates on college and university campuses across theUnited States.  Its single channeltelevision system is placed free of charge in campus dining facilities andstudent unions.  The Network’sbroadcasts contain music, news, information and entertainment programming.  As of June 30, 2001, the Network wasinstalled or contracted for installation in 1,870 locations at approximately814 colleges and universities.  As ofJune 30, 2000, the Network was installed or contracted in 1,790 locations atapproximately 759 colleges and universities. The Network generates revenue through the advertising placed on it.

             Link Magazine is a publicationdistributed to over 650 college campus. As of the date hereof, the Company has elected not to publish new issuesof Link Magazine for an unspecified period of time.  iD8 was a marketing agency providing creative services andplacing media purchases for its clients. iD8 ceased operations on July 31, 2001. Wetair.com is an Internet site for young adults offering entertainmentinformation.

             MPM is a targeted media placementand promotions company that reaches the college student, minority  and military markets.  MPM provides media placement services inspecialized newspapers and magazines, radio, television, Internet, and outdoormedia.  MPM also produces events,promotions and provides public relations services.  MPM’s primary source of revenue is from the sale of media placements.  CTN sold MPM on July 10, 2001 (see Note(E)).

             TheCompany maintains a headquarters office in Atlanta, Georgia and sales officesin New York, Chicago and Los Angeles. MPM is based in Santa Barbara, California with sales offices in New Yorkand San Francisco.

             Certain of the Company’s revenuesare affected by the pattern of seasonality common to most school-relatedbusinesses.  Historically, the Companyhas generated a significant portion of its revenue during the period fromSeptember through May and substantially less revenue during the summer monthswhen colleges and universities do not hold regular classes.

 

**NOTE (B) – Preferred Stock**

             AtJune 30, 2001, the Company’s preferred stock consists of Series A ConvertiblePreferred Stock (“Series A”) and Series B Convertible Preferred Stock (“SeriesB”) of which U-C Holdings, LLC (“Holdings”) owns (i) all of the 2,176,664outstanding Series A shares out of the 2,510,000 Series A shares that have beendesignated and (ii) all of the 266,666 outstanding Series B shares out of the266,666 Series B shares that have been designated.

             EffectiveMarch 31, 2001, the redemption feature of the Series A was waived pursuant toan agreement between the Company and Holdings, which will cease the accretionof Series A to its highest redemption value at the end of each reportingperiod, and the Company will no longer be obligated to redeem, for cash, theoutstanding shares of Series A at the option of the Series A holders.  This allows the Company to move theclassification of the Series A from Mandatorily Redeemable Preferred Stock toStockholders’ Equity.

             OnApril 5, 2001, the Company issued 266,666 shares of Series B to Holdings for$15.00 per share, or an aggregate purchase price of $3,999,990.  The Series B accrues a cumulative dividendof 12% per annum, compounding on a quarterly basis.  The Series B is convertible into shares of common stock, asdetermined by multiplying the number of shares of Series B to be converted bythe $15.00 per share purchase price and dividing the product by the conversionprice of the Series B then in effect with respect to such shares.  On the date of issuance, the conversionprice of the Series B was $2.50.  Eachshare of Series B has voting rights based upon the number of shares of commonstock into which Series B is convertible. At June 30, 2001, 1,599,996shares of common stock were reserved for conversion of the Series B.  There are an additional 45,876 shares of common stock reservedfor the conversion of dividends accrued with respect to the Series B throughJune 30, 2001.

             TheCompany filed an Amended and Restated Certificate of Incorporation on May 9,2001 that amends the terms of the Series A to, among other things, (i)eliminate the redemption rights of the holders of the Series A (such rights hadpreviously been waived by Holdings in an agreement dated March 31, 2001), (ii)reduce the conversion price of the Series A from $4.50 to $2.50, and (iii)incorporate into the terms of the Series A the issuance of the Series B havingrights and preferences senior to the Series A. The remaining terms of Series A are unchanged and include the 12%cumulative accrual of dividends per year, compounding on a quarterly basis.  Each share of Series A has voting rightsbased upon the number of shares of common stock into which Series A isconvertible.  Including the effect ofthe reduction in the conversion price of the Series A, at June 30, 2001,13,059,984 shares of the Company’s common stock were reserved for conversion ofthe Series A.  There are an additional2,969,167 shares of common stock reserved for the conversion of dividendsaccrued with respect to the Series A through June 30, 2001.

 

**NOTE (C) – Debt**

             Asof June 30, 2001, the Company had a revolving credit facility from a financialinstitution (the “CTN Loan”) with outstanding borrowings of up to $12.0million.  The CTN Loan requires theCompany to obtain additional equity investments, from Holdings, or from otherinvestors, on a dollar-for-dollar basis for every additional dollar borrowedunder the CTN Loan up to the $12.0 million credit limit.  As of July 10, 2001, in conjunction with thesale of MPM (see Note E), $10.3 million was paid down on the CTN Loan,resulting in a balance of $1.7 million due on December 31, 2001.

             TheCTN Loan bears interest at either (i) the Base Rate which is equal to thegreater of (a) the Federal Funds rate plus 0.5% or (b) the Prime Rate, plus2.00% per year; or (ii) the Eurodollar Rate, plus 3.50% per year.  The determination of whether to use the BaseRate or the Eurodollar Rate is at the option of the Company.  A commitment fee of 0.5% per year on  the unused portion of the facility isrequired.  The CTN Loan is due andpayable in full on December 31, 2001 and, as such, all amounts due thereunderhave been classified as current at June 30, 2001.  For the three months ended June 30, 2001 and 2000, the weightedaverage interest rate on the CTN Loan was 10.1% and 11.25%, respectively.  The CTN Loan is guaranteed by a negativepledge of the outstanding shares of stock of the Company owned by Holdings.

             Asof June 30, 2001, MPM had a term loan (the “Term Loan”) and a $5 millionrevolving credit facility (the “Revolver Loan”) from a separate financialinstitution and its affiliates.  At June30, 2001, $11.5 million was outstanding under the Term Loan and $5 million wasoutstanding under the Revolver Loan.  Asof July 10, 2001, in conjunction with the sale of MPM (see Note E), the entirebalance of both the Term Loan and the Revolver Loan was paid in full.

             TheCompany’s debt agreements contain financial covenants that, among otherrestrictions, require the maintenance of certain financial ratios and cashflows, restrict asset purchases, dividend payments or distributions  and accelerate the maturities upon a changein control of the Company.

             Forthe three months ended June 30, 2001, the Company was in violation of afinancial covenant associated with the CTN Loan for which a waiver wasobtained.  Additionally, the Companybelieves that certain requirements under the CTN Loan covenants may not be metduring fiscal 2001.  If the Companyfails to meet a covenant under the CTN Loan, the financial institution has theright to declare the loan due upon demand. The Company is currently in discussions with financial institutionsregarding new credit facilities and exploring other capital-raisingalternatives.  The Company cannot becertain that any of the alternatives will be consummated.  Holdings has committed to provide fundingthrough fiscal 2001 in the event the Company experiences cash flow deficitsfrom operations or cash flow deficits in connection with debt servicerequirements.

**NOTE (D) – Property and Equipment**

Property and equipment consists of thefollowing:

|                                 | **Estimated****Useful  Lives** |   | **June 30,****2001** |       | **December 31,****2000** |   |
|--------------------------------------|--------------------------------|--------|----------------------|------------|--------------------------|--------|
|                                 |                           |   |                 |       |                     |   |
| Entertainment  systems               | 5 years                        |   | $                    | 16,035,286 |                     | $      | 15,335,068 |   |
| Machinery  and equipment             | 5 -7 years                     |   | 1,073,708            |       | 1,064,818                |   |
| Capitalized  website costs           | 3 years                        |   | 1,423,236            |       | 1,403,891                |   |
| Furniture  and Fixtures              | 7 years                        |   | 539,713              |       | 536,928                  |   |
| Leasehold improvements               | 7-11  years                    |   | 304,940              |       | 297,316                  |   |
|                                 |                           |   |                      |       |                          |   |
|                                 |                           |   | 19,376,883           |       | 18,638,021               |   |
| Less:  Accumulated depreciation |                           |   | (7,895,140           | )          | (6,140,713               | )      |
|                                 |                           |   |                      |       |                          |   |
| Total                                |                           |   | $                    | 11,481,743 |                     | $      | 12,497,308 |   |
|                                 |                           |   |                      |       |                          |   |

 

 

**NOTE (E) – Discontinued Operations**

             OnJune 1, 2001, the Company entered into a stock purchase agreement to sell allof the outstanding shares of common stock, no par value, of MPM to MPM Holding,Inc., a Delaware corporation f/k/a MPM Acquisition, Inc., for $28.0 million incash, subject to certain adjustments to the purchase price, including a workingcapital adjustment based on MPM’s estimated balance sheet as of the closingdate.  At the closing of the transactionon July 10, 2001, the Company received, after adjustments, $27.7 million incash in exchange for its ownership of all of the common stock of MPM.  Accordingly, the results of that businesshave been reflected as Discontinued Operations in these notes and theaccompanying consolidated financial statements.

             Approximately$16.9 million of the proceeds from the sale of MPM were used to repay the TermLoan and the Revolver Loan. Additionally, the Company used approximately $10.3 million of theproceeds to reduce its indebtedness under the CTN Loan.  The remainder of the proceeds received bythe Company will be used for other corporate purposes, including the payment ofexpenses incurred in connection with the sale of MPM.

The operating results with respect todiscontinued operations are as follows:

|   | Net  Sales and Loss From Discontinued Operations |                        |
|--------|--------------------------------------------------|-----------------------------|
|   |                                             | Six  Months Ended  June 30, |   | Six  Months Ended  June 30, |   |
|   |                                             | 2001                        |   | 2000 |   |
|   |                                             |                             |   |  |   |
|   |                                             |                        |   |   |   |
|   | Net sales                                        | $                           | 22,650,766 |   | $ | 23,712,025 |   |
|   | Net loss from discontinued operation             | (1,136,436                  | ) | (1,132,956 | ) |
|   |                                             |                             |   |  |   |
|        |                                                  |                             |  |  |  |  |  |

 

|   | Assets  and Liabilities of Discontinued Operations |            |
|--------|----------------------------------------------------|-----------------|
|   |                                               |            |   |
|   |                                               | June  30,  2001 |   | December  31,  2000 |   |
|   |                                               |                 |   |  |   |
|   |                                               |            |   |   |   |
|   | Current  assets                                    | 12,322,599      |   | 14,258,185 |   |
|   | Property,  plant and equipment net                 | 1,354,251       |   | 1,557,029 |   |
|   | Other  assets                                      | 23,112,322      |   | 24,736,654 |   |
|   | Current  liabilities                               | (30,868,425     | ) | (33,001,303 | ) |
|   |                                               |                 |   |  |   |
|   | Net  assets of discontinued operation              | 5,920,747       |   | 7,550,565 |   |
|   |                                               |                 |   |  |   |

             Theaccompanying consolidated financial statements have been restated to conform todiscontinued operations treatment for all historical periods presented.

 

**NOTE  (F) –Commitments and Contingencies**

             Inconnection with the Company’s acquisition of the rights to and inventory ofvideo jukeboxes in 1991, the Company agreed to pay two former stockholders anaggregate of $100,000, one-half being payable at such time as the Company’s netpre-tax income equals at least $500,000 and the balance being payable at suchtime as the Company has an additional $500,000 in net pre-tax earnings.  The Company will provide for thesecontingent liabilities at the time at which ultimate payment is consideredprobable.

             TheCompany has an Origination Services Contract with Crawford Communications, Inc.(“Crawford”).  The original agreementprovides for payments of approximately $1,320,000 over a five year periodending on July 15, 2003. In accordance with the Origination Services Contract,Crawford is responsible for the transmission via satellite of the Network’sdaily programming, including encoding signals, testing, maintaining theNetwork’s programming library, and obtaining programming from the Network’ssources.  Crawford is also responsiblefor the uplink of the programming to a satellite as well as the downlink of thesignal from the satellite at each installation site.  As of June 30, 2001, the Company has paid approximately $836,000to Crawford pursuant to the Origination Services Contract.

             TheCompany has an agreement with Turner Private Networks, Inc. and CNN HeadlineNews to provide news and sports programming for the Network through December31, 2002. The total license fee is approximately $3,156,250.  As of June 30, 2001, the Company has paidapproximately $2,043,750 pursuant to this agreement.

             TheCompany has a Transponder Use Agreement with Public Broadcasting Service(“PBS”).   The Company has subleasedcapacity on a satellite owned and operated by GE American Communications, Inc.(“GE”) and leased to PBS by GE.  Thisagreement provides for payments of approximately $3,924,000 over a five yearperiod that terminates on July 31, 2003. The Company has protected status on this satellite, where in the eventof a satellite failure or performance problem, the Company’s programming willpreempt transmissions of other users on this satellite or on anothersatellite.  As of June 30, 2001, theCompany has paid approximately $2,289,000 pursuant to this agreement.

**NOTE (G) Segment Reporting**

             TheCompany previously had three reportable segments: (i) CTN (which includes theNetwork Link Magazine and iD8), (ii) Wetair.com and (iii) MPM.  Since the prior reporting period, the operationsof Wetair.com have been scaled back and folded into the CTN segment.  The Company sold MPM on July 10, 2001 andits operations are discussed as a discontinued operation in Note (E).  Thus, the Company will report only onesegment, CTN, going forward.

**NOTE (H) Subsequent Events**

             iD8, the Company’s advertisingagency division, terminated operations on July 31, 2001.  All remaining goodwill initially recordedwith the purchase of iD8 has been written off as of June 30, 2001.  Except for minimal severance, there are noother costs associated with the closing.

**NOTE (I) New AccountingPronouncements**

             In July 2001, the FinancialAccounting Standards Board (“FASB”) issued Statements of Financial AccountsStandards No. 141.  “BusinessCombinations” and No. 142 “Goodwill and Other Intangibles”.  Under these new standards the FASBeliminated accounting for certain mergers and acquisitions as poolings ofinterests, eliminated amortization of goodwill and indefinite life intangibleassets, and established new impairment measurement procedures forgoodwill.  For calendar-year reportingcompanies, the standards become effective for all acquisitions completed on orafter June 30, 2001.  Changes infinancial statement treatment for goodwill and intangible assets arising frommergers and acquisitions completed prior to June 30, 2001 become effectiveJanuary 1, 2002.  We are currentlyassessing the impact of implementing these standards.

**NOTE (J) Earnings (loss) Per Common Share**

             The Company computes basic income(loss) per share based upon the weighted average number of issued common sharesfor each period.  Diluted income (loss)per share is based upon the addition of the effect of common stock equivalents(stock options and warrants)  to thedenominator of the basic income (loss) per share calculation, using thetreasury stock method, if their effect is dilutive.

 

**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

**Forward-Looking Statements**

             Certainforward-looking information contained in this Quarterly Report is beingprovided in reliance upon the “safe harbor” provisions of the PrivateSecurities Litigation Reform Act of 1995 as set forth in Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended.  Suchinformation includes, without limitation, discussions as to estimates,expectations, beliefs, plans, strategies and objectives concerning theCompany’s future financial and operating performance.  Such forward-looking information is subject to assumptions andbeliefs based on current information known to the Company and factors thatcould yield actual results differing materially from those anticipated.  The Company undertakes no obligation toupdate or revise forward-looking statements to reflect changed assumptions, theoccurrence of unanticipated events or changes in future operating results.  Please see Exhibit 99.1, “Safe HarborCompliance Statement for Forward-Looking Statements,” for additional factors tobe considered by stockholders and prospective stockholders.

**Overview**

             CTNMedia Group, Inc., a Delaware corporation, (the “Company”), commencedoperations in January 1991.  The Companyis a diversified media company specializing in reaching targeted audiences.  The Company operates primarily in thetelevision and online sectors.  TheCompany owns and operates the College Television Network (the “Network”), aproprietary commercial television network that operates on college anduniversity campuses across the United States. The Network is provided to campuses through single-channel televisionsystems placed free of charge primarily in the campus public venues, includingdining facilities and student unions. At June 30, 2001, the Network was installed or contracted forinstallation at approximately 1,870 locations at approximately 814 colleges anduniversities throughout the United States. The Network reaches approximately 1,500,000 young adult viewers eachday.

             Certainof the Company’s revenue is affected by the pattern of seasonality common tomost school-related businesses. Historically, the Company has generated a significant portion of itsrevenue during the period of September through May and substantially lessrevenue during the summer months when colleges and universities do not holdregular classes.

**Results of Operations**

             Thefollowing table sets forth certain financial data derived from the Company’sstatement of operations for the three and six months ended June 30, 2001 andJune 30, 2000:

|                                             | Three  Months Ended |
|--------------------------------------------------|---------------------|
|                                             | June  30, 2001      |   | June  30, 2000 |   |
|                                             |                     |   |  |   |
|                                             |                |   | % |   |   | % |
|                                             | $                   | of Revenue | $ | of Revenue |
|                                             |                     |  |  |  |
| Revenue                                          | 3,407,876           |   | 100 |   | 3,076,776 |   | 100 |   |
| Operating expenses                               | 1,377,882           |   | 40 |   | 1,470,300 |   | 48 |   |
| Publishing expenses                              | 298,459             |   | 9 |   | 690,414 |   | 22 |   |
| Advertising agency  expense                      | 337,159             |   | 10 |   | 382,463 |   | 12 |   |
| Selling,  general, & administrative expenses | 3,917,548           |   | 115 |   | 5,163,819 |   | 168 |   |
| Depreciation  & amortization                 | 1,125,613           |   | 33 |   | 921,201 |   | 30 |   |
| Interest  expense, net                           | (295,874            | ) | 9 |   | (232,624 | ) | 8 |   |
|                                             |                |   |   |   |   |   |   |   |
| Net  loss from continuing operations             | (3,944,659          | ) | 116 |   | (5,784,045 | ) | 188 |   |
|                                             |                |   |   |   |   |   |   |   |
| Loss from discontinued  operations               | (757,673            | ) | 22 |   | (714,797 | ) | 23 |   |
|                                                  |                     |  |  |  |  |  |  |  |  |  |

 

|                                             | Six  Months Ended |
|--------------------------------------------------|-------------------|
|                                             | June  30, 2001    |   | June  30, 2000 |   |
|                                             |                   |   |  |   |
|                                             |              |   | % |   |   | % |
|                                             | $                 | of  Revenue | $ | of  Revenue |
|                                             |                   |  |  |  |
| Revenue                                          | 6,370,869         |   | 100 |   | 7,801,803 |   | 100 |   |
| Operating expenses                               | 2,841,112         |   | 45 |   | 2,808,506 |   | 36 |   |
| Publishing expenses                              | 422,048           |   | 7 |   | 1,598,010 |   | 20 |   |
| Advertising agency  expense                      | 829,941           |   | 13 |   | 747,085 |   | 10 |   |
| Selling,  general, & administrative expenses | 7,736,534         |   | 121 |   | 10,253,380 |   | 131 |   |
| Depreciation  & amortization                 | 2,010,718         |   | 32 |   | 1,558,378 |   | 20 |   |
| Interest  expense, net                           | (638,408          | ) | 10 |   | (364,086 | ) | 5 |   |
|                                             |              |   |   |   |   |   |   |   |
| Net  loss from continuing operations             | (8,107,892        | ) | 127 |   | (9,527,642 | ) | 122 |   |
|                                             |              |   |   |   |   |   |   |   |
| Loss from discontinued  operation                | (1,136,436        | ) | 18 |   | (1,132,956 | ) | 15 |   |
|                                                  |                   |  |  |  |  |  |  |  |  |  |

             Revenuefrom continuing operations increased to $3,407,876 for the three month periodended June 30, 2001, as compared to $3,076,776 for the comparable period in theprior year.  Revenue from continuingoperations decreased to $6,370,869 for the six month period ended June 30,2001, as compared to $7,801,803 for the comparable period in the prioryear.  Network advertising revenue of$2,726,659 and $5,050,943 for the three and six month periods ended June 30,2001 represented a 14% increase for the current three month period but anoverall 20% decrease from the comparable six month period in the prioryear.  A soft advertising market and atransition in the Company’s sales force have contributed to this decrease.  The Company’s fee and commission revenuethrough iD8 of $538,160 and $1,174,718 represented a 92% and 141% increase fromthe comparable three and six month periods in the prior year.  This increase is primarily due to acquiringtwo large customers at the end of fiscal 2000 that continued to contract workthrough June, 2001.  Publishing revenueconsisted of $145,206 for one issue of Link Magazine published for the currentsix months ended June 30, 2001 as compared to $1,005,990 for three issues fromthe comparable period in the prior year. The Company intends to increaseNetwork sales during the year ending December 31, 2001 by continuing to expandits advertiser base and sell-out levels and by further increasing the feecharged for its advertising spots. Although the Company has agreements with national advertisers, noassurance can be given that these or other advertisers will continue topurchase advertising time from the Company, or that future significantadvertising revenues will ever be generated. A failure to significantly increase advertising revenues could have amaterial impact on the operations of the Company.

 

             Operatingexpenses for continuing operations, including publishing and advertising agencyexpenses, were $2,013,500 and $4,093,101 for the three and six month periodsended June 30, 2001 as compared to $2,543,177 and $5,153,601 for the sameperiods in the prior year.  Publishingexpenses at the Company decreased 57% and 73% for the three and six monthperiods ended June 30, 2001 as compared to the same periods in the prioryear.  The Company’s collegepublication, Link Magazine, distributed one issue during the six month periodended June 30, 2001 and Link experienced reduced overhead compared to the sameperiod in the prior year in which three issues of Link were distributed.  Operations, programming, and advertisingagency expenses remained relatively unchanged.

             Selling,general and administrative expenses for continuing operations decreased to$3,917,548 and $7,736,534 for the three and six month periods ended June 30,2001 as compared to $5,163,819 and $10,253,380 for the same periods for theprior year.  This decrease is primarilyattributable to minimizing expense in various advertising sales categories suchas outside advertising, market research, promotions, variable costs directlyrelated to revenue. Significant reductions in recruiting fees, bad debt expenseand stock option compensation also contributed to the reduction.  The remaining decrease is due to thereduction of selling, general or administrative expenses at Wetair.com.

             Depreciationand amortization expense from continuing operations totaled $1,125,613 and$2,010,718 for the three and six month periods ended June 30, 2001 as comparedto $921,201 and $1,558,378 for the same periods in the prior year.  The increase is attributable to the additionof DVB (“Direct Video Broadcast”) systems in school locations, coupled withamortization of the remaining iD8 goodwill of approximately $210,000.

             TheCompany recorded net interest expense from continuing operations of $295,874and $638,408 for the three and six month periods ended June 30, 2001 ascompared to $232,624 and $364,086 in the same periods of the prior year.  The increase in interest expense relates tothe higher level of debt incurred for working capital purposes.

             TheCompany incurred a net loss from continuing operations of $3,944,659 and$8,107,892 in the three and six month periods ended June 30, 2001 as comparedto a net loss of $5,784,045 and $9,527,642 in the same periods in the prioryear.

             TheCompany incurred a net loss from discontinued operations of $757,673 and$1,136,436 in the three and six month periods ended June 30, 2001 as comparedto $714,797 and $1,132,956 in the same periods in the prior year.  These amounts represent the separate resultsof MPM, which was sold on July 10, 2001. These amounts reflect an increase in net loss from discontinuedoperations of 6% and 0%, respectively, over the same periods in the prior year.

**Financial Condition and Liquidity**

             Cashused in operations decreased to $4,338,074 during the six months ended June 30,2001, from $8,234,371 for the comparable period in the prior year.  The impact of increased collections ofaccounts receivable in the first six months compared to the same period in the prior year was the primary cause ofthis decrease.  In April 2001, theCompany obtained an equity infusion from Holdings to fund current workingcapital needs through the issuance of Series B Preferred Stock.

             Acquisitionsand purchases of property and equipment decreased to $832,672 during the sixmonths ended June 30, 2001 from $3,434,402 for the comparable period in theprior year.  This decrease is primarilyattributable to scaling back the installation of school locations pursuant tothe Company’s plan for 2001.

             Cashprovided by financing activities was $3,796,943 for the six months ended June30, 2001, compared to $7,855,299 provided by financing for the same period inthe prior year.  Approximately$3,700,000 of current year funds were derived from the sale of preferred stockas compared to approximately $7,000,000 drawn down from a line of credit duringthe prior year.

             Cashprovided by discontinued operations increased to $493,382 during the six monthsended June 30, 2001 as compared to cash used in discontinued operations ofapproximately $500 for the comparable period in the prior year.

             AtJune 30, 2001, the Company did not meet a financial covenant under itsremaining credit facility for which a waiver has been received.  In connection with the $1.7 million ofindebtedness due on December 31, 2001, the Company is currently in discussionswith financial institutions regarding new credit facilities and exploring othercapital-raising alternatives.  TheCompany cannot be certain that any of these alternatives will be consummatedand there can be no assurances that these efforts will be successful.  Holdings has committed to provide fundingthrough fiscal 2001 in the event the Company experiences cash flow deficits fromoperations or cash flow deficits in connection with debt service requirements.

**Item 3.  Quantitativeand Qualitative Disclosures About Market Risk**

             TheCompany is exposed to market risk from changes in interest rates related tovariable-rate debt outstanding under the CTN Loan.  This risk arises in the normal course of business rather thanfrom trading.  At August 14, 2001, theCompany had $1.7 million in long-term debt subject to variable rates ofinterest and therefore views its market risk as immaterial.

**PART IIOTHER INFORMATION**

**Item 1.  LegalProceedings.**

             Fromtime to time, in the normal course of business, various claims are made againstthe Company.  Except for proceedingsdescribed below, there are no material proceedings to which the Company is aparty and management is unaware of any material contemplated actions againstthe Company.

             OnMarch 22, 2001, a lawsuit styled James Harder v. CTN Media Group, Inc. and U-CHoldings, LLC, was filed in the United States District Court, Eastern Divisionof the Northern District of Illinois. The lawsuit alleges that the Company violated the Age Discrimination inEmployment Act by terminating Mr. Harder. The complaint seeks in excess of $500,000 in compensatory damages as aresult of the Company's alleged discrimination, as well as punitive damages andreimbursement for the plaintiff's attorney's fees and associated costs andexpenses of the lawsuit.

             OnMarch 19, 2001, the Company instituted a lawsuit styled CTN Media Group, Inc.,f/k/a College Television Network, a Delaware corporation and Armed ForcesComminations, Inc., a New York corporation, v. Omnipod, Inc., a Delawarecorporation, f/k/a e-palette, inc., a New York corporation in the State Courtof Fulton County, Georgia.  The lawsuitalleges nonpayment by Omnipod  forservices rendered by the Company pursuant to that certain Advertising Agreementdated as of October 29, 1999 between the parties.  The complaint seeks payment in the amount of $552,438.67, whichis the alleged amount that was due and payable on October 29, 2000 inaccordance with the terms of the Advertising Agreement.  The Company also seeks reimbursement for itsattorney's fees and associated costs and expenses of the lawsuit.  On April 30, 2001, Omnipod answered thecomplaint and filed a counterclaim alleging tortious interference with businessrelations and related commercial claims, arising from the Company’s allegedrefusal to consent to Omnipod’s issuance of preferred stock.  The counterclaim seeks damages in an amountto be determined at trial, as well as reimbursement for Omnipod’s attorney'sfees and associated costs and expenses of the lawsuit.

             Managementbelieves that it has meritorious defenses in each of the foregoing matters andintends to pursue its positions vigorously. Litigation is inherently subject to many uncertainties; however,management does not believe that the outcome of these cases, individually, orin the aggregate, will have a material adverse effect on the financial positionof the Company.  However, depending onthe amount and timing of an unfavorable resolution(s) of the contingencies, itis possible that the Company's future results of operations or cash flows couldbe materially affected in a particular quarterly period.

 

**Item 2.  Changes inSecurities.**

|   | (a)    | The  Company filed an Amended and Restated Certificate of Incorporation on May 9,  2001 that amends the terms of its Series A Convertible Preferred Stock to,  among other things, (i) eliminate the redemption rights of the holders of the  Series A (such rights had previously been waived by Holdings in an agreement  dated March 31, 2001), (ii) reduce the conversion price of the Series A  Convertible Preferred Stock from $4.50 to $2.50, and (iii) incorporate into  the terms of the Series A the issuance of the Series B Convertible Preferred  Stock having rights and preferences senior to the Series A.  The remaining terms of Series A are  unchanged and include the 12% cumulative accrual of dividends per year,  compounding on a quarterly basis.   Each share of Series A has voting rights based upon the number of  shares of common stock into which Series A is convertible.  As a result of the amendment to the terms  of the Series A, the Company will no longer be obligated to redeem, for cash,  the outstanding shares of Series A at the option of the Series A holders.                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (b)    | The  Series B issued by the Company on April 5, 2001 has rights and preferences  senior to the Series A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (c)    | Pursuant  to an exemption from registration under Rule 506 of Regulation D promulgated  under the Securities Act of 1933, as amended, on April 5, 2001, the Company  issued 266,666 shares of Series B Convertible Preferred Stock  to Holdings for $15.00 per share, or an  aggregate purchase price of $3,999,990.   The Series B has rights and preferences senior to the Series A.  The Series B accrues a cumulative dividend  of 12% per annum, compounding on a quarterly basis.  The Series B is convertible into shares of common stock, as determined  by multiplying the number of shares of Series B to be converted by the $15.00  per share purchase price and dividing the product by the conversion price of  the Series B then in effect with respect to such shares.  On the date of issuance, the conversion  price of the Series B was $2.50.  Each  share of Series B has voting rights based upon the number of shares of common  stock into which Series B is convertible.   The proceeds received by the Company from the sale of the Series B  will fund short term working capital needs of the Company. |

 

**Item 3.  Defaults UponSenior Securities.**

             Noevents occurred during the quarter covered by this Report that would require aresponse to this Item.

**Item 4.  Submission ofMatters to a Vote of Security Holders.**

OnMay 9, 2001 the Company held its annual meeting of shareholders.  At the annual meeting, the shareholderselected the following individuals to the Board of Directors of the Company:

|   |   | (1)  Jason Elkin          | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|--------|--------|---------------------------|-------------------|------------------|--------------|--------|
|   |   | (2)  Daniel Gill          | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (3)  Steven Haft          | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (4)  Geoffrey Kanter      | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (5)  C. Thomas McMillen   | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (6)  Hollis W. Rademacher | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (7)  Stephen Roberts      | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (8)  Thomas Rocco         | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (9)  Avy H. Stein         | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (10)  James Wood          | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |
|   |   | (11)  Sergio Zyman        | For:  14,009,872; | Against: 14,470; | Abstained: 0 |   |

 

Theshareholders also elected PricewaterhouseCoopers LLP as the Company’sindependent accountant for the current year:       For:14,011,402; Against: 11,200; Abstained: 1,740.

 

**Item 5.  OtherInformation.**

             Noevents occurred during the quarter covered by this Report that would require aresponse to this Item.

**Item 6.  Exhibits andReports on Form 8-K.**

|   | (a)    | Exhibits.                                                                                                                                                                                                                                                                                                                                    |                                                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
|   |   | The  following exhibits are filed with this Report:                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
|   |   | Exhibit  10.1                                                                                                                                                                                                                                                                                                                                | Consulting  Agreement dated May 4, 2001 between the Company and C. Thomas McMillen. |
|   |   |                                                                                                                                                                                                                                                                                                                                         |                                                                                     |   |
|   |   | Exhibit  99.1                                                                                                                                                                                                                                                                                                                                | Safe  Harbor Compliance Statement for Forward-Looking Statements.                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |                                                                                     |   |
|   | (b)    | Reports  on Form 8-K:                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
|   |   | A  report on Form 8-K filed April 6, 2001 disclosing (i) the amendment to the  terms of the Series A Convertible Preferred Stock effective March 31, 2001,  (ii) the issuance of 266,666 shares of Series B Convertible Preferred Stock  and (iii) approval of an Amended and Restated Certificate of Incorporation.                         |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
|   |   | A  report on Form 8-K/A filed April 16, 2001 disclosing (i) the amendment to the  terms of the Series A Convertible Preferred Stock effective March 31, 2001,  (ii) the issuance of 266,666 shares of Series B Convertible Preferred Stock  and (iii) approval of an Amended and Restated Certificate of Incorporation.                      |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
|   |   | A  report on Form 8-K filed June 12, 2001 disclosing the Company’s entering into  to the stock purchase agreement to sell Armed Forces Communications, Inc., a  New York corporation doing business as Market Place Media and a wholly-owned  subsidiary of the Company, to MPM Holding, Inc., formerly known as MPM  Acquisition, Inc. |

 

 

 

SIGNATURES

             Inaccordance with the requirements of the Exchange Act, the registrant causedthis Report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

|                   | CTN MEDIA GROUP, INC.                                |   |
|------------------------|------------------------------------------------------|--------|
|                   | Registrant                                           |   |
|                   |                                                 |   |
|                   |                                                 |   |
|                   | /s/ Jason Elkin                                      |   |
| Date:  August 14, 2001 |                                                      |   |
|                   | Jason  Elkin                                         |   |
|                   | *Chief  Executive Officer and Chairman of the Board* |   |
|                   | *(Principal  Executive Officer)*                     |   |
|                   |                                                 |   |
|                   |                                                 |   |
|                   | /s/ Patrick Doran                                    |   |
| Date: August 14, 2001  | **                                                   |   |
|                   | Patrick Doran                                        |   |
|                   | *Chief  Financial Officer and Secretary*             |   |
|                   | *(Principal  Accounting and Financial Officer)*      |   |