<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from __________ to __________
Commission file number: 000-23105
-----------------
AMERICAN INDEPENDENT NETWORK, INC.
(Exact name of small business issuer in its charter)
------------------
DELAWARE 752504551
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
(817) 222-1234
(Address and telephone number of principal executive offices)
-----------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. AS OF AUGUST 11, 1998,
THERE WERE APPROXIMATELY 18,465,199 SHARES OF THE COMPANY'S COMMON STOCK ISSUED
AND OUTSTANDING.
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
Financial Statements: Page
--------------------- ----
<S> <C>
Comparative Balance Sheet (Unaudited) at June 30, 1998 and
June 30, 1997 F-1
Comparative Statement of Operations (Unaudited) for the
Six Months ended June 30, 1998 and 1997 F-3
Comparative Analysis of Stockholders' Equity (Unaudited)
Six Months ended June 30, 1998 and 1997 F-4
Comparative Statement of Cash Flows (Unaudited) for the
Six Months ended June 30, 1998 and 1997 F-5
Notes to Comparative Financial Statements (Unaudited) F-6
</TABLE>
2
<PAGE> 3
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
June 30,
ASSETS
<TABLE>
<CAPTION>
1998 1977
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,543 $ 27,389
Accounts receivable 4,743 452,503
Trade credits receivable 30,000 30,000
Note receivable, net of
doubtful account of $700,000 700,000 0
Common stock 0 18,000
Prepaid expenses 0 112 736
---------- ----------
TOTAL CURRENT ASSETS 739,286 641,216
---------- ----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold improvements 22,851 22,851
Equipment and furnishings 130,317 122,379
Digital compression equipment 844,719 622,253
---------- ----------
997,887 741,851
Accumulated depreciation (141,622) (102,700)
---------- ----------
TOTAL PLANT, PROPERTY AND EQUIPMENT 856,265 664,783
---------- ----------
OTHER ASSETS
Deferred tax benefits 0 306,477
Trade credits receivable, net of
allowance of $125,138 241,990 422,128
Other investments, net of
amortization of $68,968 737,485 2,787,813
Note Receivable, net of
doubtful account of $884,595 884,595 0
---------- ----------
TOTAL OTHER ASSETS 1,864,070 3,516,418
---------- ----------
TOTAL ASSETS $3,459,621 $4,822,417
---------- ----------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-1
<PAGE> 4
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
June 30,
<TABLE>
<CAPTION>
1998 1997
------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 264,163 $ 293,682
Notes payable 2,194,740 1,636,993
Accrued interest - notes 255,349 165,788
Advances from affiliates 27,903 942
Interest due preferred shareholders 37,440 61,399
Equipment lease payments 175,380 139,380
----------- -----------
TOTAL CURRENT LIABILITIES 2,954,975 2,298,184
----------- -----------
LONG TERM DEBT
Deferred income tax 661,824 0
Equip lease payments 153,444 208,917
----------- -----------
TOTAL LONG TERM DEBT 815,268 208,917
----------- -----------
TOTAL LIABILITIES 3,770,243 2,507,101
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1997 286,624 shares issued,
June 30, 1998 42,427 shares issued 42,427 217,795
Common Stock - 20,000,000 shares $.01 Par
Authorized, 1997 14,810,717 shares issued,
1998 18,465,199 shares issued 184,650 148,083
Additional Paid in Capital 4,788,714 3,069,309
Retained Earnings (Deficit) (4,857,663) (1,188,725)
Note Receivable (468,750) (0)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (310,622) 2,315,316
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 3,459,621 $ 4,822,417
----------- -----------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-2
<PAGE> 5
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Operations (Unaudited)
For the Six Months Ended June 30,
<TABLE>
<CAPTION>
1998 1997
------ ------
REVENUES
<S> <C> <C>
Income from network operations $ 130,385 $ 723,194
---------- ----------
COST AND EXPENSES:
Satellite rental 180,000 393,000
Programming expenses 1,926 10,437
Production expenses 52,144 55,475
Depreciation 27,240 50,000
Amortization of leasehold 2,400 0
Amortization of Senior Channel 68,968 0
Rental Expense (Net) 32,400 29,815
Administrative expenses 267,207 231,730
---------- ----------
TOTAL COST AND EXPENSES 632,285 770,457
---------- ----------
NET (LOSS) FROM OPERATIONS (501,900) (47,263)
---------- ----------
OTHER EXPENSES:
Interest expense (net) 185,572 190,789
Amortization of debt issue cost 0 212,409
Loss on conversion of bridge loans
to Common Stock 34,468 0
---------- ----------
Total Other Expense 220,040 403,198
---------- ----------
(LOSS) BEFORE INCOME TAXES 721,940 (450,461)
INCOME TAX BENEFIT (EXPENSE) 0 99,000
---------- ----------
NET (LOSS) $ 721,940 $ (351,461)
EARNINGS PER SHARE OF COMMON STOCK $ (0.04) $ (0.03)
WEIGHTED AVERAGE SHARES 18,344,782 12,405,350
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-3
<PAGE> 6
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Analysis of Stockholders' Equity (Unaudited)
For The Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
--------------- ----------------- Paid-in Note Retained
Shares Amount Shares Amount Capital Receivable Earnings
------ ------ ------ ------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996 107,546 $107,546 14,045,268 $140,453 $2,513,734 $ 0 $(1,494,741)
Preferred B Shares Issued 175,154 175,154 963,347
Issue cost of Preferred B (547,999)
Conversion of Preferred B
Shares to Common (229,273) (229,273) 458,546 4,585 224,688
Common Issued to Bridge
Loan Investors 1,521,039 15,210 380,260
Conversion of Bridge Loans 132,652 1,327 429,791
Sale of Common Stock 200,000 2,000 98,000
Sale of Common Stock for
a Note Receivable 1,875,000 18,750 450,000 (468,750)
Net Loss for the Year Ended
December 31, 1997 (2,640,982)
------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1997 53,427 $ 53,427 18,232,715 $182,325 $4,511,821 (468,750) ($4,135,723)
Preferred Stock Conversions (11,000) (11,000) 22,000 220 10,780
Conversion of Bridge Loans 72,610 726 233,024
Common Issued to Bridge
Loan Investors 137,874 1,379 33,089
Net Loss for the Six
Months Ended June 30, 1998 721,940
--------------------------------------------------------------------------------
BALANCE JUNE 30, 1998 42,427 $42,427 18,465,199 $184,650 $4,788,714 $(468,750) ($4,857,663)
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-4
<PAGE> 7
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Cash Flow (Unaudited)
For The Six Months Ended June 30,
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES:
Net (Loss) $ 721,940 $(351,461)
Adjustment to reconcile net income to net
cash from operating activities:
Cost of loan conversion to common stock 34,468 0
Depreciation 27,240 50,000
Amortization of leasehold 2,400 0
Trade credits receivable 20,000 10,000
Amortization of Senior Channel 68,968 0
Accounts receivable (2,493) (441,773)
Deferred tax benefit 0 (99,000)
Investment in common stock 91,525 (18,588)
Accounts payable 86,759 9,346
Accrued interest 135,819 68,253
Customer deposits 0 (20,000)
Advances from affiliates 18,301 (4,100)
--------- ---------
TOTAL CASH USED BY OPERATING ACTIVITIES (238,953) (797,323)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in equipment (18,549) (51,488)
Investment in prepaid assets 0 15,000
Investment in other assets 0 (1,380)
Investment in film library (4,320) 0
--------- ---------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES (22,869) (37,868)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Notes payable increase 294,560 103,126
Long term lease decrease (62,963) (42,700)
Preferred stock increase 0 179,078
Common stock increase 0 7,655
Additional paid-in capital increase 0 555,575
--------- ---------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 231,597 802,734
--------- ---------
Net Cash Decrease (30,225) (32,457)
Cash, beginning of Period 34,768 59,846
--------- ---------
CASH AT END OF PERIOD $ 4,543 $ 27,389
--------- ---------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-5
<PAGE> 8
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Consist of cash balances. Cash and Cash equivalents
consist of highly liquid investments with an original maturity date of ninety
days or less. The company does not have any cash equivalents.
TRADE CREDITS RECEIVABLES - The Company owns trade credits in the amount of
$397,128 at June 30, 1998 and $452,128 at June 30, 1997. As defined by the
International Reciprocal Trade Association, a trade dollar is a unit of account
that denotes the right to receive (receivable) or the obligation to pay (a
payable), one US dollar worth of goods and services within a barter system or
network. While all of the trade credits may be used by the company at any time,
the Company has shown a pattern of using $25,000 to $30,000 worth of the credits
in each of the past two years. Therefore the Company's trade credits are being
classified as current $30,000 and other assets of $241,990 at June 30, 1998. The
Trade Credits were obtained in 1994 in exchange for an Investment in Common
Stock and was valued at the fair value of the asset investment in common stock.
The Company uses the credits primarily for travel expense. The Company, also
exchanged Trade Credits for computer equipment and Fine Art. Management does not
consider impairment under FAS 121 is appropriate as management intends to fully
utilize the credits and the credits do not have an expiration date. Due to the
slow rate of usage the Company has established a valuation account of $125,138.
The trade group, the Company is a member of, currently has over twenty four
hundred participants. The Company can use these trade credits without any
infusion of cash except sales or excise taxes.
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The company has accounts
receivable at June 30, 1998 of $4,743 owed by regular customers. Management
deems this amount to be fully collectible. No allowances for doubtful accounts
is necessary. At June 30, 1997 the total was $452,503.
PLANT, PROPERTY AND EQUIPMENT is recorded at cost.
DEPRECIATION - The cost of plant, property and equipment is depreciated over the
estimated useful life of the assets ranging from equipment at 5 years to
leasehold improvements at 20 years. Depreciation is on a straight line basis.
Depreciation and amortization was $29,640 for the six months ended June 30, 1998
and $50,000 for the six months ended June 30, 1997.
INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Income tax accounting information is disclosed in Note 3 to the comparative
financial statements.
F-6
<PAGE> 9
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
OTHER INVESTMENTS - Consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Prepaid Media $1,426,933
Investment in stocks $ 104,930 200,000
Film Library 11,843 1,000
Investment in Senior Channel,
net of amortization of $68,968 620,712 0
Prepaid telephone 0 322,500
Media trade due bills 0 836,000
---------- ----------
Total Other Investments $ 737,485 $2,786,433
---------- ----------
</TABLE>
NOTE 2 - NOTES PAYABLE
Notes Payable at June 30, 1998 consist of the following notes:
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
-------- ---- -------- --------- --------
<S> <C> <C> <C> <C>
Shelley Media
Marketing (1) 9/30/98 10% 50,650 2,532
Cleveland
Broadcasting Co.(1) 9/30/98 10% 15,014 1,000
ATN Network, Inc.(1) 9/30/98 10% 571,450 27,550
Pacific Acquisition
Group, Inc. 12/31/98 11% 250,500 12,525
Bridge Loan 10/31/97 15% 1,307,126 211,742
---------- --------
Total $2,194,740 $255,349
---------- --------
</TABLE>
(1) Affiliated Companies
Notes Payable at June 30, 1997 consist of the following notes:
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
-------- ---- -------- --------- --------
<S> <C> <C> <C> <C>
Lyn Broadcasting
Corporation (1) 8/31/97 10% $ 4,500 $17,272
Shelley Media
Marketing (1) 9/30/97 10% 51,100 12,948
Cleveland
Broadcasting Co.(1) 9/30/97 10% 34,668 9,387
ATN Network, Inc.(1) 9/30/97 10% 33,475 23,189
Pacific
Acquisition Group 12/31/97 11% 435,500 63,101
Bridge Loan 10/31/97 15% 1,137,750 41,436
---------- --------
Total $1,636,993 $165,788
---------- --------
</TABLE>
(1) Affiliated Companies
F-7
<PAGE> 10
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
The Company has engaged in transactions with certain other enterprises that are
affiliated companies. These companies are controlled by the management and
principal stockholders of American Independent Network. The controlled companies
transactions are as follows:
<TABLE>
<CAPTION>
1998 1997
Funds Funds
------------------- ------------------
Borrowed Repaid Borrowed Repaid
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cleveland Broadcasting $0 $8,156 $0 $1,222
San Antonio Broadcasting $0 $3,700 $0 $0
TV Channel 22 $22,500 $0 $0 $1,500
ATN Network $334,500 $168,826 $0 $3,028
Shelley Media Marketing $0 $450 $0 $0
</TABLE>
NOTE 3 - INCOME TAXES
Deferred income tax liability consist of the following components:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Provision for Income Taxes
Current 0 0
Deferred Liability 0 0
Deferred tax asset 0 (0)
--------- -------
Total Provision for Income Taxes 0 (0)
--------- -------
The tax effects of temporary differences
which give rise to deferred income by
assets and liabilities consist of the following:
Deferred income tax assets
Valuation allowance 475,724 0
Net operating loss 207,477 207,477
Deferred income tax liabilities
Installment sale method on Notes Payable (1,137,548) 0
Valuation allowance (207,477) (0)
---------- -------
Net deferred tax asset liability (661,824) 207,477
---------- -------
Reconciliation of statutory U.S. tax rate with
effective tax rate:
Statutory U.S. tax rate on pretax loss 0% 0%
Average tax rate on temporary differences 0 0
Average tax rate on change in valuation allowance 0 0
-- --
Effective tax rate 0 0
-- --
</TABLE>
F-8
<PAGE> 11
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash used for:
Interest $ 17,520 $68,216
Income Taxes $ 0 $ 0
</TABLE>
NOTE 5 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for where it is practicable to estimate that
value:
Notes Receivable - The carrying amount approximates fair value because each is
valued at estimated discounted future cash flows.
Long Term Investments - The fair value of these investments are estimated based
on quoted market prices for those and similar investments.
Notes Payable - The carrying value approximates fair value because of the short
maturity date of these investments.
The estimated Fair Values of the Company's Financial Instruments are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Notes Receivable $1,584,595 $1,584,595 0 0
Long Term Investments $104,930 $220,065 $1,037,000 $1,037,000
Accounts Payable $264,163 $264,163 $236,726 $236,726
Equipment Lease Payments $360,353 $324,318 $374,997 $333,747
Notes Payable $2,194,740 $2,194,740 $1,562,843 $1,562,843
</TABLE>
F-9
<PAGE> 12
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
NOTE 6 - LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The Company is obligated on three leases. The leases are as follows:
Building - The Company utilizes the spaces as both corporate offices and
studios. The lease is $5,400 per month and expired May 31, 1998.
Equipment - The Company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 31,
1999. The lease has a fair market value purchase option at the end of the lease.
Total lease obligation is $390,996 and the lease has been treated as a capital
lease. In May 1997, the Company entered into a lease for additional digital
equipment for a period of 36 months with payments of $4,302 per month. The lease
period is from June 1, 1997 to May 1, 2000. The lease has been capitalized.
Satellite - The Company leased satellite transponder space under an initial
operating lease. The lease is for three years ending July 31, 1999 with a total
lease obligation of $2,250,000. The Company has modified its lease reducing its
satellite band width from 24 MHZ to 8 MHZ which reduces its future lease cost
from $1,187,500 to $619,848 under the lease modification. The Company pays the
new lease balance at the rate of $30,000 per month during the period January 1,
1998 through July 1, 1999 when the lease terminates.
Details of lease obligations are as follows:
<TABLE>
<CAPTION>
Capitalized Capitalized Operating
Equipment Equipment Transponder
Lease #1 Lease #2 Lease
----------- ----------- -----------
<S> <C> <C> <C>
1998 $ 69,690 $25,624 $180,000
1999 $139,380 $51,624 $210,000
2000 $ 24,237 $21,510
</TABLE>
NOTE 7 - SALE OF ASSETS
AIN entered into an Agreement with Media Fund, Inc. dated December 10, 1997.
This Agreement materially affects the financial statements and AIN daily
operations.
Media Fund, Inc. under the provisions of the above agreement, gave to AIN a
promissory note in the amount of $5,000,000. The agreement has certain
restrictions as to the use of funds received from Media Fund, Inc. (See
below).
F-10
<PAGE> 13
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
Media Fund, Inc. payment schedule on promissory note:
<TABLE>
<S> <C>
Due within 12 months
May 30, 1998 50,000
June 30, 1998 750,000
September 30, 1998 300,000
December 30, 1998 300,000
---------
1,400,000
---------
Due beyond 12 months
March 30, 1999 300,000
June 30, 1999 300,000
December 31, 2002 3,000,000
---------
3,600,000
---------
</TABLE>
MEMO: An allowance for Doubtful Accounts in the amount of $1,584,595 has been
established due to incomplete financial information on Media Fund, Inc. The
note is un-collateralized.
RESTRICTIONS ON CASH RECEIVED:
Eighty percent (80%) of the first $2,000,000 or $1,600,000 must be used to
purchase IRD (digital to analog converters) equipment, and towards the Company's
goal of reaching seventy million (70,000,000) households nationally.
ADDITIONAL CONDITIONS OF THE ABOVE AGREEMENT:
1. Media Fund, Inc. receives twenty percent (20%) of all spots of AIN, HTN, and
Senior Network for a period of four years beginning December 10, 1998 with three
(3) renewal options of five (5) years each.
2. Media Fund, Inc. was issued 1,875,000 shares in AIN, HTN (Hispanic Television
Network) and Senior Network.
3. Media Fund, Inc. will provide up to twelve (12) hours of Network quality
programming per day which AIN agrees to air. The commercial spots due Media
Fund, Inc. per the agreement will be used by Media Fund, Inc. for Media Fund
clients.
F-11
<PAGE> 14
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
NOTE 8- PREFERRED STOCK
Preferred stockholders' may convert one share of preferred stock into two shares
of common. Preferred stockholders' also receive nine percent interest per annum
in lieu of dividends. Summary of preferred stock transactions are as follows:
<TABLE>
<S> <C>
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to Common Stock
during the six months ended June 30, 1998 at the rate of two
Common for each Preferred B, which would equal 22,000 shares
of Common (11,000)
-------
Number of Preferred B Shares outstanding at June 30, 1998 42,427
-------
</TABLE>
NOTE 9 - SENIOR CHANNEL
In 1997, the Company acquired the Copyright to the Senior Channel in exchange
for programming services in the amount of $689,680 that was billed at standard
programming rates. The Senior Channel has twenty four hour programming per day.
The Company's cash plan projections indicate the cost will be recovered in four
to five years. The Company continues to evaluate this asset quarterly and will
amortize the cost over five years. The amortization during the six months ended
June 30, 1998 was $68,968.
NOTE 10 - INVESTMENT IN COMMON STOCK
The Company owns 193,100 shares of Quick Tent, Inc. (NASD Small Cap QTNT).
The Company sold Quick Tent, Inc. stock in November 1997 at $1.085 per share.
The quoted market value at June 30, 1998 was $1.15 per share. The costs basis
in the financial statements is $0.523 per share for a capitalized amount of
$104,930. This investment is included in Other Assets.
NOTE 11 - FILM LIBRARY
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $11,453.
NOTE 12 - BRIDGE LOAN
Bridge Loan holders have the option of converting their loans to Common Stock at
$3.25 per share. Loans in the amount of $233,750 were converted into 72,610
Common Shares during the six months ended June 30, 1998. To equate the
difference between market price of $.025 and conversion price of #3.25 and
additional 130,602 Common Shares were issued. The market value of $.025 per
share was derived from 1997 valuation based on sales of shares discounted for
the much larger number of shares involved and the restrictions on the stock.
F-12
<PAGE> 15
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
June 30, 1998 and 1997
NOTE 13 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED
BY INCREASE IN NOTES PAYABLE
<TABLE>
<S> <C>
Notes Payable at June 30 , 1998 $2,194,740
Notes Payable at December 31, 1997 2,133,930
----------
Net Change 60,810
Notes paid by Conversion to Common Stock 233,750
----------
Cash Flow generated by Note Payable $ 294,560
----------
</TABLE>
F-13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Revenues
For the six months ended June 30, 1998, revenues were $130,385 and for the
comparable six month period in 1997, revenues were $723,194. The decrease in
1998 revenues is due to decrease in digital channel lease revenues decreasing by
$380,425 and decrease in programming revenues of $212,384.
Cost of operations
For the six months ended June 30, 1998 and March 31, 1997, cost of operations
were $365,078 and $538,727, respectively. The $173,649 decrease in cost of
operations for the six months ended June 30, 1998 is due primarily to the
$213,000 decrease in the cost of satellite expense, $8,511 decrease in the cost
of programming and $20,360 decrease in depreciation and an increase in
amortization of Senior Channel of $68,968.
General and administrative
For the six months ended June 30, 1998 general and administrative expenses were
$267,207 and for the six months ended June 30, 1997, general and administrative
expenses were $231,730. The $35,477 increase in general and administrative
expenses for the six months ended June 30, 1998 is due to general increase of
$20,327 in labor costs, $33,575 in legal expenses, and decrease of $9,527 in
travel expenses and $8,898 in other general administrative expenses.
Operating Loss
For the six months ended June 30, 1998, the Company's operating losses were
$501,900 and for the comparable period in 1997, the Company's operating losses
were $47,263. The loss before income taxes for the six months ended June 30,
1998 was $721,122 as compared to a loss before income taxes for the six months
ended June 30, 1997 of $450,461. Net loss for the six months ended June 30, 1998
was $721,122 as compared to a net loss for the six months ended June 30, 1997 of
$351,461. The loss before income taxes in 1998 is $270,661 more than the 1997
loss for the similar period and is due primarily to decrease of $380,425 in
satellite revenues, a decrease of $213,384 in programming revenues, a decrease
of $173,649 in cost of operations, an increase in general and administrative
expenses of $35,477 and a decrease of $183,976 in other expenses which is due
primarily to a decrease of $212,409 in amortization of debt issue cost and an
increase of $33,650 in loss on conversion of bridge loans of common stock.
Net Loss
For the six months ended June 30, 1998 and June 30, 1997, net loss per share was
$.04 and $.03 respectively.
3
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit
-------------- ----------------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended (1)
3.2 Bylaws of the Company, as amended (1)
4.1 Form of Warrant Agreement (1)
10.1 Lease for Offices (1)
10.2 Employment Agreement with Dr. Donald W. Shelton (1)
10.3 Employment Agreement with Randy Moseley (1)
10.4 Stock Option Agreement with Dr. Donald W. Shelton (1)
10.5 Stock Option Agreement with Randy Moseley (1)
10.6 Form of License Agreement (Affiliate Agreement) (1)
10.7 GE Americom Lease Agreement (1)
10.8 Master Lease with Insight Investments (1)
10.9 Promissory Note Extension Agreement with Lyn Broadcasting
Corporation (1)
10.10 Promissory Note Extension Agreement with Shelly Media Marketing (1)
10.11 Promissory Note Extension Agreement with Cleveland Broadcasting Co.(1)
10.12 Promissory Note Extension Agreement with ATN Network, Inc.(1)
10.13 Promissory Note with Super Six, Inc.(1)
10.14 Promissory Note with Jim Thornbo (1)
10.15 Promissory Note with Logistic Services International, Inc.(1)
10.16 Promissory Note with Rajendra Shah (1)
10.17 Promissory Note with Gary Lamberg (1)
10.18 Promissory Note with Frank Lyons (1)
10.19 Loan and Security Agreement with Midas Fund (1)
10.20 United State Federal Communications Commission Radio Station Authorization
(1)
10.21 Form of Programming Agreement(2)
10.22 Promissory Note with ATN Network, Inc.(2)
10.23 "All News Channel" Agreement(2)
10.24 Promissory Note Extension Agreement with Super Six, Inc.(2)
10.25 Promissory Note Extension Agreement with Logistics Services, Inc.(2)
10.26 Promissory Note Extension Agreement with Shelly Media Marketing
Corporation(2)
10.27 Promissory Note Extension Agreement with Cleveland Broadcasting
Corporation(2)
10.28 Promissory Note Extension Agreement with ATN Network Inc.(2)
10.29 Form of Equipment Agreement(2)
10.30 Channel Use and Programming Agreement with Dominion Sky Angel(2)
10.31 Agreement of Settlement, Compromise and Assignment(2)
10.32 Assignment of Senior Channel(2)
10.33 Agreement with Media Fund, Inc.(2)
10.34 1995 Stock Option Plan(2)
</TABLE>
4
<PAGE> 18
<TABLE>
<S> <C>
10.35 Promissory Note and Amendment to Agreement(3)
27.1 Financial Data Schedule
</TABLE>
- -----------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form 10-SB (File No. 000-23105), filed with the Securities and
Exchange Commission on September 19, 1997.
(2) Previously filed as an exhibit to the Company's Pre-Effective Amendment
No. 2 to the Registration Statement on Form 10-SB (File No. 000-23105),
filed with the Securities and Exchange Commission on April 10, 1998.
(3) Previously filed as an exhibit to the Company's Pre-Effective Amendment
No. 4 to the Registration Statement on Form 10-SB (File No. 000-23105),
filed with the Securities and Exchange Commission on July 15, 1998.
The Company did not file any Current Reports on Form 8-K during the fiscal
quarter ended June 30, 1998.
5
<PAGE> 19
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.
AMERICAN INDEPENDENT NETWORK, INC.
Date: August 10, 1998 /s/ Donald Shelton
----------------------------------------------------
Dr. Donald W. Shelton, Chief Executive Officer
Date: August 10, 1998 /s/ Randy Moseley
----------------------------------------------------
Randy Moseley, President and Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNAUDITED FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) QUARTERLY REPORT ON FORM
10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,543
<SECURITIES> 104,930
<RECEIVABLES> 4,743
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 739,286
<PP&E> 997,887
<DEPRECIATION> 141,622
<TOTAL-ASSETS> 3,459,621
<CURRENT-LIABILITIES> 2,954,975
<BONDS> 0
0
42,427
<COMMON> 184,650
<OTHER-SE> 537,699
<TOTAL-LIABILITY-AND-EQUITY> 3,459,621
<SALES> 0
<TOTAL-REVENUES> 130,385
<CGS> 365,078
<TOTAL-COSTS> 632,285
<OTHER-EXPENSES> 220,040
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,572
<INCOME-PRETAX> 721,940
<INCOME-TAX> 0
<INCOME-CONTINUING> 721,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 721,940
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
