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: SEPTEMBER 30, 1998.
(X) 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 75-2504551
(State or Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
6125 Airport Freeway, Suite 200, Haltom City, Texas 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 November 12, 1998,
there were approximately 19,987,507 shares of the Company=s Common Stock issued
and outstanding.
Transitional Small Business Disclosure Format: Yes ( ) No (X)
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Financial Statements: Page
Comparative Balance Sheet (Unaudited) at September 30, 1998
and September 30, 1997.......................................................F-1
Comparative Statement of Operations (Unaudited) for the Nine
Months ended September 30, 1998 and 1997.....................................F-3
Comparative Analysis of Stockholders= Equity (Unaudited) for
the Nine Months ended September 30, 1998 and 1997............................F-4
Comparative Statement of Cash Flows (Unaudited) for the
Nine Months ended September 30, 1998 and 1997................................F-5
Notes to Comparative Financial Statements (Unaudited)........................F-6
[THIS SPACE HAS BEEN LEFT INTENTIONALLY BLANK]
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
September 30, 1998
<S> <C> <C>
Assets
1998 1997
----------- -----------
Current Assets
Cash and cash equivalents .......... $ 18,145 $ 26,364
Accounts receivable ................ 45,506 517,605
Trade credits receivable ........... 30,000 30,000
Common stock ....................... 0 18,000
Prepaid expenses ................... 0 112 736
----------- -----------
Total Current Assets ............. 93,651 705,293
----------- -----------
Plant, Property and Equipment
Leasehold improvements ............. 22,851 22,851
Equipment and furnishings .......... 131,020 122,379
Digital compression equipment ...... 845,092 671,753
----------- -----------
998,963 816,983
Accumulated depreciation ........... (156,442) (122,700)
----------- -----------
Total Plant, Property and Equipment 842,521 694,283
----------- -----------
Other Assets
Deferred tax benefits ............... 475,724 327,477
Trade credits receivable, net of
allowance of $125,138 ............. 241,990 422,128
Other investments, net of
amortization of $103,452 .......... 1,067,748 2,787,813
----------- -----------
Total Other Assets ................. 1,785,462 3,537,418
----------- -----------
Total Assets ................. $ 2,721,634 $ 4,936,994
----------- -----------
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
F-1
</TABLE>
<PAGE>
<TABLE>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
September 30, 1998
<S> <C> <C>
1998 1997
----------- -----------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable ........................... $ 210,233 $ 201,350
Notes payable .............................. 2,478,083 2,069,745
Accrued interest - notes ................... 343,652 165,788
Advances from affiliates ................... 22,338 1,717
Interest due preferred shareholders ........ 37,440 16,399
Equipment lease payments ................... 175,380 139,380
---------- -----------
Total Current Liabilities ............... 3,267,126 2,594,379
---------- -----------
Long Term Debt
Deferred income tax ........................ 0 0
Equip lease payments ....................... 120,314 174,223
---------- -----------
Total Long term debt ........................ 120,314 174,223
---------- -----------
Total Liabilities .................... 3,387,440 2,768,602
---------- -----------
Stockholders' Equity
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1997 286,624 shares issued,
June 30, 1998 42,427 shares issued ...... 42,427 282,700
Common Stock - 20,000,000 shares $.01 Par
Authorized, 1997 15,716,680 shares issued,
1998 16,586,927 shares issued ............ 165,867 157,167
Additional Paid in Capital ................. 4,337,929 3,030,297
Retained Earnings (Deficit) ................ (5,212,029) (1,301,772)
---------- -----------
Total Stockholders' Equity ........... (665,806) 2,168,392
---------- -----------
Total Liabilities and Stockholders Equity . $ 2,721,634 $ 4,936,994
----------- -----------
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1998
<S> <C> <C>
1998 1997
------------ ------------
Revenues
Income from network operations ... $ 228,545 $ 852,631
------------ ------------
Cost and Expenses:
Satellite rental ................. 270,000 475,500
Programming expenses ............. 5,203 11,379
Production expenses .............. 77,493 79,236
Depreciation ..................... 40,860 70,000
Amortization of leasehold ........ 3,600 0
Amortization of Senior Channel ... 103,452 0
Rental Expense (Net) ............. 48,609 49,948
Administrative expenses .......... 423,030 305,469
------------ ------------
Total Cost and Expenses ......... 972,247 991,532
------------ ------------
Net (Loss) from operations ......... (743,702) (138,901)
Other Expenses: ------------- ------------
Interest expense (net) ........... 294,389 221,198
Amortization of debt issue cost .. 0 224,409
Loss on disposal of assets ....... 4,565
Loss on conversion of bridge loans
to Common Stock ................ 33,650 0
------------ ------------
Total Other Expense ............. 332,604 445,607
------------ ------------
(Loss) Before Income Taxes ......... (1,076,306) (584,508)
Income tax benefit (expense) ....... 0 120,000
------------ ------------
Net (Loss) ......................... $ (1,076,306) $ (464,508)
Earnings Per Share of Common Stock . $ (0.07) $ (0.03)
Weighted Average Shares ............ 16,586,927 14,716,680
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Analysis of Stockholders' Equity (Unaudited)
For The Nine Months Ended September 30, 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Additional
Preferred Stock Common Stock Paid-in Note Retained
Amount Shares Amount Shares Amount Capital Receivable Earnings
Balance 12-31-96 ...... 107,546 $ 107,546 14,045,268 $ 140,453 $ 2,513,734 $ 0 $(1,494,741)
Preferred B Shares .... 175,154 175,154 963,347
Issued
Issue cost of ......... (547,999)
Preferred B
Conversion of ......... (229,273) (229,273) 458,546 4,585 224,688
Preferred B Shares
to Common
Common Issued to Bridge 1,521,039 15,210 380,260
Loan Investors
Conversion of Bridge .. 132,652 1,327 429,791
Loans
Sale of Common Stock .. 200,000 2,000 98,000
Sale of Common Stock .. 1,875,000 18,750 450,000 (468,750)
for a Note Receivable
Net Loss for the Year
Ended December
31, 1997 .........................................................................................................(2,640,982)
Balance December ...... 53,427 53,427 18,232,715 $ 182,325 $ 4,511,821 (468,750) ($4,135,723)
31, 1997
Preferred Stock ....... (11,000) (11,000) 22,000 220 10,780
Conversions
Conversion of ......... 72,610 726 233,024
Bridge Loans
Common Issued to ...... 134,602 1,346 32,304
Bridge Loan Investors
Reverse sale of ....... (1,875,000) (18,750) (450,000) (468,750)
Common Stock for
a Note Receivable
Net Loss for the
Nine Months Ended
September 30, 1998 ...............................................................................................(1,076,306)
Balance September ..... 42,427 $ 42,427 16,586,927 $ 165,867 $ 4,337,929 $-0- ($5,212,029)
30, 1998
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Cash Flow (Unaudited)
For The Nine Months Ended September 30, 1998
<S> <C> <C>
1998 1997
----------- -----------
Cash Flows Provided (used)
by Operating Activities:
Net (Loss) ............................... $(1,076,306) $ (464,508)
Adjustment to reconcile net income to net
cash from operating activities:
Cost of loan conversion to common stock . 33,650 0
Depreciation ............................ 40,860 70,000
Amortization of leasehold ............... 3,600 0
Trade credits receivable ................ 20,000 10,000
Amortization of Senior Channel .......... 103,452 0
Accounts receivable ..................... (43,256) (502,950)
Deferred tax benefit .................... 0 (120,000)
Investment in common stock .............. 173,825 (18,588)
Accounts payable ........................ 32,829 (82,986)
Accrued interest ........................ 224,122 23,253
Customer deposits ....................... 0 (20,000)
Advances from affiliates ................ 12,736 (7,250)
----------- -----------
Total Cash used by Operating Activities .... (474,488) (000,000)
----------- -----------
Cash Flows from Investing Activities:
Investment in equipment .................. (19,625) (100,488)
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 .. (23,945) (00,000)
----------- -----------
Cash Flows Provided by Financing Activities:
Notes payable increase .................... 577,903 535,126
Long term lease decrease .................. (96,093) (77,394)
Preferred stock increase .................. 0 175,154
Common stock increase ..................... 0 16,714
Additional paid-in capital increase ....... 0 516,563
----------- -----------
Total Cash provided by Financing Activities 481,810 000,000
----------- -----------
Net Cash Increase .......................... (16,623) (33,482)
Cash, beginning of Period .................. 34,768 59,846
----------- -----------
Cash at End of Period ...................... $ 18,145 $ 26,364
----------- -----------
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
F-5
</TABLE>
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 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 September 30, 1998 and $452,128 at September 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 September 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 September 30, 1998 of $45,506 owed by regular customers.
Management deems this amount to be fully collectible. No allowances for doubtful
accounts is necessary. At September 30, 1997 the total was $517,605.
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 $44,460 for the nine months ended September
30, 1998 and $70,000 for the nine months ended September 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>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 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:
1998 1997
---------- ----------
Prepaid Media ................... $ 447,047 $1,426,933
Investment in stocks ............ 22,630 200,000
Film Library .................... 11,843 2,380
Investment in Senior Channel,
net of amortization of $103,452 586,228 0
Prepaid telephone ............... 0 322,500
Media trade due bills ........... 0 836,000
---------- ----------
Total Other Investments ...... $1,067,748 $2,787,813
---------- ----------
Note 2 - Notes Payable
<TABLE>
<CAPTION>
Notes Payable at September 30, 1998 consist of the following notes;
<S> <C> <C> <C> <C>
Due Accrued
Creditor Date Interest Principal Interest
- - -------------------- -------- -------- ---------- ------------
Shelley Media
Marketing (1)...... 9/30/98 10% 50,650 3,799
Cleveland
Broadcasting Co.(1) 9/30/98 10% 6,829 1,500
ATN Network, Inc.(1) 9/30/98 10% 874,546 57,551
Pacific Acquisition
Group, Inc. ....... 12/31/98 11% 250,500 18,787
Bridge Loan ........ 10/31/97 15% 1,295,558 262,015
---------- -----------
Total ......... $2,478,083 $ 343,652
---------- -----------
(1) Affiliated Companies
</TABLE>
<TABLE>
<CAPTION>
Notes Payable at September 30, 1997 consist of the following notes;
<S> <C> <C> <C> <C>
Due Accrued
Creditor Date Interest Principal Interest
- - -------------------- ------- -------- ---------- -----------
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% 29,968 9,387
ATN Network, Inc.(1) 9/30/97 10% 289,927 23,189
Pacific
Acquisition Group . 12/31/97 11% 250,500 63,101
Bridge Loan ........ 10/31/97 15% 1,443,750 39,891
---------- -----------
Total ......... $2,069,745 $ 165,788
---------- -----------
(1) Affiliated Companies
</TABLE>
F-7
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 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:
1998 1997
Funds Funds
Borrowed Repaid Borrowed Repaid
Cleveland Broadcasting $0 $19,260 $0 $1,222
San Antonio Broadcasting $0 $9,764 $0 $0
TV Channel 22 $22,500 $0 $0 $1,500
ATN Network $702,767 $112,462 $0 $3,028
Shelley Media Marketing $0 $450 $0 $0
Note 3 - Income Taxes
Deferred income tax liability consist of the following components:
1998 1997
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 0 0
Valuation allowance ( 207,477) ( 0)
--------- -------
Net deferred tax asset liability 475,724 207,477
-------- -------
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
-- --
F-8
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 30, 1998 and 1997
Note 4 - Supplemental Cash Flow Information
1998 1997
Cash used for:
Interest $ 70,266 $197,945
Income Taxes $ 0 $ 0
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:
1998 1997
------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Long Term Investments $ 22,630 $ 20,065 $1,037,000 $1,037,000
Accounts Payable $210,233 $210,233 $201,350 $201,350
Equipment Lease Payments $295,694 $266,125 $313,603 $282,243
Notes Payable $2,478,083 $2,478,083 $2,069,745 $2,069,745
F-9
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 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:
Capitalized Capitalized Operating
Equipment Equipment Transponder
Lease #1 Lease #2 Lease
----------- ----------- -----------
1998 $ 34,845 $12,812 $ 90,000
1999 $139,380 $51,624 $210,000
2000 $ 24,237 $21,510
Note 7- 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:
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to Common Stock
during the nine months ended September 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 September 30, 1998 42,427
-------
F-10
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
September 30, 1998 and 1997
Note 8 - 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 nine months ended
September 30, 1998 was $103,452.
Note 9- Investment in Common Stock
The Company owns 31,630 shares of Quick Tent, Inc. (NASD Small Cap QTNT). The
Company sold Quick Tent, Inc. stock in 1998 at prices ranging from $1.87 to $.12
per share. The quoted market value at September 30, 1998 was $.12 per share. The
costs basis in the financial statements is $0.523 per share for a capitalized
amount of $16,542. This investment is included in Other Assets.
Note 10- Film Library
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $11,843.
Note 11 - 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 nine months ended September 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.
Note 12 - Reconciliation of Changes in Notes Payable to Cash Flow Generated
by Increase in Notes Payable
Notes Payable at September 30, 1998 $2,4782083
Notes Payable at December 31, 1997 2,133,930
---------
Net Change 344,153
Notes paid by Conversion to Common Stock 233,750
-------
Cash Flow generated by Note Payable $ 577,903
-------
F-11
<PAGE>
Item 2. Management Discussion and Analysis.
American Independent Network, Inc. (the ACompany@), a Delaware corporation,
finished the nine month period ended September 30, 1998 with a loss greater than
expected. In July 1998, the Company completed its filing of the Form 10-SB
registration statement with the Securities and Exchange Commission making the
Company subject to the reporting requirements of Section 13 of the Securities
and Exchange Act of 1934, as amended. The Company believes that the time and
expense incurred in completing this process is a positive step for its future
development and growth. The legal expenses incurred preparing, filing and
completing of the Form 10-SB contributed to the Company=s loss. Although the
Company has not achieved the revenues for 1998 that it expected, it did reduce
cost of operations by decreasing its satellite cost. The revenues were less than
expected due to slow growth in its affiliate base, which does not give the
Company enough household coverage by its affiliates to obtain Nielsen ratings,
and slower than expected leasing of channel space on the Company=s digital
compression technology. The Company continues to work towards signing on new
affiliates, particularly in the top 30 television markets, and leasing satellite
transponder space to other entities that desire to distribute their programming
via the satellite. The Company will seek to minimize its losses in the near
future and produce profits long-term by adding affiliates in enough of the top
30 television markets to allow the Company to subscribe to Nielsen ratings,
which the large advertising agencies will use to place advertising dollars with
the Company and leasing one to three channels on its digital compression system,
although no assurances can be given that the Company will achieve these goals or
if achieved, that they will have a positive impact on the Company.
Revenues
For the nine months ended September 30, 1998, revenues were $ 228,545 and for
the comparable nine month period in 1997, revenues were $852,631. The decrease
in 1998 revenues is due to decrease in digital channel lease revenues decreasing
by $344,325 and decrease in programming revenues of $258,839.
Cost of operations
For the nine months ended September 30, 1998 and September 30, 1997, cost of
operations were $500,608 and $626,115, respectively. The $125,507 decrease in
cost of operations for the nine months ended September 30, 1998 is due primarily
to the $205,500 decrease in the cost of satellite expense, $6,176 decrease in
the cost of programming and $25,540 decrease in depreciation and an increase in
amortization of Senior Channel of $103,452.
General and administrative
For the nine months ended September , 1998 general and administrative expenses
were $423,030 and for the nine months ended September 30, 1997, general and
administrative expenses were $305,469. The $117,561 increase in general and
administrative expenses for the nine months ended September 30, 1998 is due to
general increases of $38,946 in labor costs, $86,727 in legal expenses, $11,785
in telephone, $12,675 in consulting fees, and decreases of $12,496 in travel
expenses, $13,584 in office supplies, and $6,492 in other general administrative
expenses.
Operating Loss
For the nine months ended September 30, 1998, the Company=s operating losses
were $743,702 and for the comparable period in 1997, the Company=s operating
losses were $138,901. The loss before income taxes for the nine months ended
September 30, 1998 was $1,076,306 as compared to a loss before income taxes for
the nine months ended September 30, 1997 of $584,508. Net loss for the nine
months ended September 30, 1998 was $1,076,306 as compared to a net loss for the
nine months ended September 30, 1997 of $464,508. The loss before income taxes
in 1998 is $491,798 more than the 1997 loss for the similar period and is due
primarily to decrease of $344,325 in satellite revenues, a decrease of $258,839
in programming revenues, a decrease of $125,507 in cost of operations, an
increase in general and administrative expenses of $117,561 and a decrease of
$113,003 in other expenses which is due primarily to a decrease of $224,409 in
amortization of debt issue cost and increases of $73,191 interest expense and
$33,650 in loss on conversion of bridge loans to common stock.
Net Loss
For the nine months ended September 30, 1998 and September 30, 1997, net loss
per share was $.07 and $.03, respectively.
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On October 14, 1998, the Company issued three million four hundred thousand
(3,400,000) shares of restricted common stock to Data West, Inc. for investment
banking and market development services, involving the acquisition of assets and
new capital for the Company and public relations in assisting the Company in its
efforts to attain national attention for the Company=s television network and to
increase the national recognition of the Company. The Company believes that the
issuance of the shares to Data West, Inc. for the services to be provided will
allow the Company to add new affiliates and obtain Nielsen ratings, giving the
Company the opportunity to increase its advertising revenues.
Item 5. Other Information
On November 3, 1998, the Company=s board of directors approved a 1-5 reverse
stock split of the Company=s issued and outstanding common stock, $0.01 par
value and on November 6, 1998 the Company=s board of directors approved the
effective date of the reverse split to be November 17, 1998. Pre-split
outstanding shares of 19,987,507 will be reduced to post-split shares of
3,997,502. The number of authorized common stock shares has not changed from
20,000,000 shares. The Company believes that the reverse split will stimulate
broader investment interest in the Company=s Common Stock and that investors in
the capital markets may be more interested in the Company=s Common Stock if the
overall number of outstanding shares of common stock is reduced. The Company
believes with fewer common stock shares outstanding at a higher price, there
will be increased stock market participation in the Company=s daily activity
than there would be with a large number of common shares outstanding with a low
price per share.
Item 6. Exhibits and Reports on Form 8-K.
The Exhibit Index is found on page 18 of this report.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN INDEPENDENT NETWORK, INC.
/s/ Donald W. Shelton Date: November 13, 1998
- - --------------------------------
Dr. Donald W. Shelton, Chief Executive Officer
/s/ Randy Moseley Date: November 13, 1998
- - ----------------------------------
Randy Moseley, President and Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
Index to Exhibits
<S> <C> <C>
Exhibit Page
Number Number Title of Exhibit
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 of 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 (2)
10.6 * Form of License Agreement (Affiliate Agreement) (1)
10.7 * GE American Lease Agreement (1)
10.8 * Master Lease with Insight Investment (1)
10.9 * Promissory Note Extension Agreement with Lyn Broadcasting Corporation (1)
10.10 * Promissory Note Extension Agreement with Shelley 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 States Federal Communications Commission Radio Station Authority (1)
10.21 * Form of Programming Agreement (2)
10.22 * Promissory Note with ATN Network, Inc. (2)
10.23 * AAll News Channel@ Agreement (2)
10.24 * Promissory Note Extension Agreement with Super Six, Inc. (2)
10.25 * Promissory Note Extension Agreement with Logistic Services, Inc. (2)
10.26 * Promissory Note Extension Agreement with Shelley Media Marketing Corp. (2)
10.27 * Promissory Note Extension Agreement with Cleveland Broadcasting Corp. (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)
10.35 * Promissory Note and Amendment to Agreement (3)
27.1 20 Financial Data Schedule
</TABLE>
* Incorporated by reference as noted
(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.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH (B) QUARTERLY REPORT ON FORM
10-QSB.
</LEGEND>
<CIK> 0001000876
<NAME> AMERICAN INDEPENDENT NETWORK, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-01-1998
<EXCHANGE-RATE> 1
<CASH> 18,145
<SECURITIES> 22,630
<RECEIVABLES> 45,506
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,651
<PP&E> 998,963
<DEPRECIATION> 156,442
<TOTAL-ASSETS> 2,721,634
<CURRENT-LIABILITIES> 3,267,126
<BONDS> 0
0
42,427
<COMMON> 165,867
<OTHER-SE> (874,100)
<TOTAL-LIABILITY-AND-EQUITY> 2,721,634
<SALES> 0
<TOTAL-REVENUES> 228,545
<CGS> 549,217
<TOTAL-COSTS> 972,247
<OTHER-EXPENSES> 332,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294,389
<INCOME-PRETAX> (1,076,306)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,076,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,076,306)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
