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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Podsiadlik who wrote (54405)	4/10/2000 3:43:00 PM
From: Street Hawk	Respond to of 122087

CDNW is on my radar now with today's pop. They are a going concern, i.e., they will be bankrupt soon. Here's last week's news release, can't believe this back above 5 again. CDNow Inc.'s Accountant Raises Going Concern Doubt 29 Mar 8:21 (This story was originally published late Tuesday.) WASHINGTON (Dow Jones)--CDNow Inc.'s (CDNW) independent public accountant, Arthur Anderson L.L.P., expressed "substantial doubt" about the company's ability to continue as a going concern, according to its annual report filed late Tuesday with the Se curities and Exchange Commission. The filing indicated that the going concern issue was broached in connection with CDNow's terminated merger agreement with Sony Corp. (SNE) and Time Warner Inc. (TWX). As reported March 13, Sony, Time Warner and CDNow mutually consented to terminate the merger and contribution agreement and entered into a termination agreement. Under the termination agreement, Sony and Time Warner purchased $21 million of CDNow's common stock, and replaced a $30 million short-term loan commitment with $30 million of long-term convertible debt, which is convertible at the option of the holders into CDNow common stock at $10 a share. According to the filing, CDNow believes that its current cash and cash equivalents are sufficient to meet its payment obligations until about Sept. 30, 2000. Since its inception in February 1994, CDNow has incurred significant losses, and as of Dec. 31, 1999, had accumulated losses of $174.3 million. For the years ended Dec. 31, 1999, 1998 and 1997, CDNow's net losses applicable to common shareholders were $119.2 million, $43.9 million and $11.2 million, respectively. In addition, CDNow had a working capital deficit of $37.2 million as of Dec. 31, 1999. The company added that it will continue to incur substantial operating losses for the foreseeable future, and Arthur Anderson noted in its report that the company has "significant payments due in 2000 related to marketing agreements." CDNow has previously said it plans to reduce quarterly operating expenses by $10 million to $12 million, with an ongoing quarterly cash burn rate of less than $15 million. Over the next quarter, CDNow also plans to reduce costs by almost one-third, by cutting marketing expenses and making other cost reductions. The company has also retained Allen & Co. to explore strategic options and alternative financing arrangements, and is actively seeking third-party financing or another merger transaction. However, CDNow concedes in the filing that it can not assure that it will be able to obtain the financing necessary to continue to support its business. The company is currently financing its working capital needs with cash derived from revenue, funds from the equity investment of $21 million by Sony and Time Warner and the long-term convertible debt facility available from Sony and Time Warner. CDNow, based in Fort Washington, Pa., is an online retailer of compact disks and other music-related products. -Phil McCarty, Dow Jones Newswires/Federal Filings Business News; 202-628-8904 (END) DOW JONES NEWS 03-29-00