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 March 31, 1999.
[ ] 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 [ ] No [X}
State the number of shares outstanding of each of the issuer=s classes of
common equity, as of the latest practicable date. As of July 14, 1999, there
were approximately 13,318,093 shares of the Company=s Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
ITEM 1. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this Registration
Statement:
Financial Statements:
---------------------
Comparative Balance Sheet (Unaudited) at March 31, 1999 and
March 31, 1998
Comparative Statement of Operations (Unaudited) for the Three
Months ended March 31, 1999 and 1998
Comparative Analysis of Stockholders= Equity (Unaudited) for
the Three Months ended March 31, 1999 and 1998
Comparative Statement of Cash Flows (Unaudited) for the
Three Months ended March 31, 1999 and 1998
Notes to Comparative Financial Statements (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
March 31,
ASSETS
1999 1998
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents. . . . . . $ 595 $ 94,368
Accounts receivable. . . . . . . . . 5,088 2,250
Trade credits receivable . . . . . . 30,000 30,000
Note receivable, net of
doubtful account of $700,000 . . . 0 700,000
------------ -----------
TOTAL CURRENT ASSETS . . . . . . . 35,683 826,618
------------ -----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold improvements . . . . . . . 22,851 22,851
Equipment and furnishings. . . . . . 130,642 128,842
Digital compression equipment. . . . 845,452 834,769
------------ -----------
998,946 986,462
Accumulated depreciation . . . . . . (213,008) (126,802)
------------ -----------
TOTAL PLANT, PROPERTY AND EQUIPMENT 785,937 859,660
------------ -----------
OTHER ASSETS
Deferred tax benefits . . . . . . . . 0 207,477
Trade credits receivable, net of
allowance of $125,138 . . . . . . . 221,990 261,990
Other investments . . . . . . . . . . 530,005 884,595
------------ -----------
TOTAL OTHER ASSETS . . . . . . . . . 751,995 2,251,650
------------ -----------
TOTAL ASSETS . . . . . . . . . . . $ 1,573,615 $3,937,928
------------ -----------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
March 31,
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . . $ 486,917 $ 154,997
Notes payable . . . . . . . . . . . . . . . 1,564,979 2,330,188
Accrued interest - notes. . . . . . . . . . 338,979 177,317
Advances from affiliates. . . . . . . . . . 31,038 28,402
Interest due preferred shareholders . . . . 37,440 37,440
Equipment lease payments. . . . . . . . . . 175,380 175,380
------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . 2,634,733 2,903,724
------------ ------------
LONG TERM DEBT
Deferred income tax . . . . . . . . . . . . 0 1,137,548
Equip lease payments. . . . . . . . . . . . 109,003 184,973
------------ ------------
TOTAL LONG TERM DEBT. . . . . . . . . . . 109,003 1,322,521
------------ ------------
TOTAL LIABILITIES . . . . . . . . . . . . 2,743,736 4,226,245
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1998 48,813 shares issued,
1999 42,427 shares issued . . . . . . . . 42,427 48,813
Common Stock - 20,000,000 authorized
1998 issued 16,479,587 @ $.01 par. . . . . 164,796
1999 issued 4,853,595 @ $.05 par . . . . . 261,529
Additional Paid in Capital. . . . . . . . . 5,120,625 4,223,351
Retained Earnings (Deficit) . . . . . . . . (6,594,702) (4,725,277)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . (1,170,121) (288,317)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY. $ 1,573,615 $ 3,939,928
------------ ------------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Operations (Unaudited)
For the Three Months Ended March 31,
1999 1998
----------- ------------
REVENUES
Income from network operations $ 33,464 $ 53,463
----------- ------------
COST AND EXPENSES:
Satellite rental 90,000 90,000
Programming expenses 542 844
Production expenses 22,456 24,429
Depreciation 19,500 14,520
Amortization of leasehold 500 300
Amortization of Senior Channel 34,484 0
Rental Expense (Net) 17,168 16,200
Administrative expenses 47,340 126,125
----------- ------------
TOTAL COST AND EXPENSES 231,990 272,418
----------- ------------
NET (LOSS) FROM OPERATIONS (198,526) (218,955)
----------- ------------
OTHER EXPENSES:
Interest expense (net) 64,275 84,966
Gain on disposal of assets (15,953) 0
----------- ------------
Total Other Expense 48,322 84,966
----------- ------------
(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (246,848) (303,921)
INCOME TAX BENEFIT (EXPENSE) 0 0
----------- ------------
NET (LOSS)BEFORE EXTRAORDINARY ITEM (246,848) (303,921)
EXTRAORDINARY ITEM
Cost of Conversion of Bridge Loans
To Common Stock 39,624 17,386
----------- ------------
NET (LOSS) $ (286,472) $ (321,307)
----------- ------------
EARNINGS PER SHARE OF COMMON STOCK $ (0.06) $ (0.02)
WEIGHTED AVERAGE SHARES 4,771,860 16,383,773
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Analysis of Stockholders' Equity (Unaudited)
For The Three Months Ended March 31, 1999
Additional
Preferred Stock Common Stock 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
Reverse Sale of Common Stock
for Note Receivable (1,875,000) (18,750) (450,000) 468,750
Common Issued for Financing 3,400,000 34,000 (34,000)
Adjustment to Reflect Reverse
Split of Common of 1 for 5 (15,990,005)
Affiliate Debt Forgiveness 688,726
Net Loss for the Year Ended
December 31, 1998 (2,172,507)
Post Split Bridge Loan
Conversions 378,102 18,905 260,618
--------- ---------- ------------- --------- ----------- ---------- -------------
BALANCE DECEMBER 31, 1998 42,427 $ 42,427 4,375,623 $218,780 $5,073,750 $ -0- ($6,308,230)
Conversion of Bridge Loans 62,500 3,125 46,875
Common Stock Issued Upon
Conversion of Bridge
Loans and Preferred
Stock to equalize
prior conversions 415,472 39,624
Loss for Three Months Ended
March 31, 1999 (286,472)
-----------
BALANCE MARCH 31, 1999 42,427 $ 42,427 4,853,595 $261,529 $5,120,625 $ -0- ($6,594,702)
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Cash Flow (Unaudited)
For The Three Months Ended March 31,
1999 1998
------------ ----------
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES:
Net (Loss) $ (286,472) $(321,307)
Adjustment to reconcile net income to net
cash from operating activities:
Cost of loan conversion to common stock 39,624 17,386
Depreciation 19,500 14,520
Amortization of leasehold 500 300
Trade credits receivable 10,000 0
Amortization of Senior Channel 34,484 0
Accounts receivable (2,300) 0
Accounts payable 104,362 (22,407)
Accrued interest 60,000 57,787
Advances from affiliates 0 18,800)
------------ ----------
TOTAL CASH USED BY OPERATING ACTIVITIES (20,302) (234,921)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in equipment (360) (7,124)
Investment in film library 0 (3,929)
------------ ----------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES (360) (11,053)
------------ ----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Notes payable increase 11,450 196,258
Long term lease decrease 0 (31,434)
Common stock increase 0 433
Additional paid-in capital increase 0 140,317
------------ ----------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 11,450 305,574
------------ ----------
Net Cash Increase (9,212) 59,600
Cash, beginning of Period 9,807 34,768
------------ ----------
CASH AT END OF PERIOD $ 595 $ 94,368
------------ ----------
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 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
$377,068 at March 31, 1999 and $417,128 at March 31, 1998. 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 $221,990 at March
31, 1999. 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.
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The company has accounts
receivable at March 31, 1999 of $5,088 owed by regular customers. Management
deems this amount to be fully collectible. No allowances for doubtful accounts
is necessary. At March 31, 1998 the total was $2,250.
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 $20,250 for the three months ended March 31,
1999 and $14,520 for the three months ended March 31, 1999.
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.
<PAGE>
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:
1999 1998
-------- --------
Investment in stocks $ 0 $196,455
Film Library 12,745 11,453
Investment in Senior Channel 517,260 689,680
-------- --------
Total Other Investments $530,005 $897,588
-------- --------
NOTE 2 - NOTES PAYABLE
Notes Payable at March 31, 1999 consist of the following notes;
Due Accrued
Creditor Date Interest Principal Interest
----------- -------- -------- ---------- ---------
Shelley Media
Marketing* 9/30/98 10% 97,229 5,100
Cleveland
Broadcasting Co.* 9/30/98 10% 1,132 1,000
Pacific Acquisition
Group, Inc. 12/31/98 11% 250,500 25,050
Bridge Loan 10/31/97 15% 1,216,118 302,534
---------- ---------
Total $1,564,979 $ 333,684
Advances from Other
Affiliated Companies Demand 10% 31,038 5,295
---------- ---------
Total $1,596,017 $ 338,979
---------- ---------
* Affiliated Companies
Notes Payable at March 31, 1998 consist of the following notes;
Due Accrued
Creditor Date Interest Principal Interest
----------- -------- -------- ---------- ---------
Shelley Media
Marketing* 9/30/98 10% $ 50,650 $ 1,266
Cleveland
Broadcasting Co.* 9/30/98 10% 17,933 500
ATN Network, Inc.* 9/30/98 10% 599,914 11,051
Pacific
Acquisition Group 12/31/98 11% 250,500 6,262
Bridge Loan 10/31/98 15% 1,411,191 155,443
---------- ---------
Total 2,330,188 174,522
Advances from Other
Affiliated Companies Demand 10% 28,402 2,795
---------- ---------
Total $2,358,590 $ 177,317
---------- ---------
* Affiliated Companies
<PAGE>
NOTE 3 - INCOME TAXES
Deferred income tax liability consist of the following components:
1999 1998
--------- ----------
Provision for Income Taxes:
Current 0 0
Deferred Liability 0 1,137,548
Less Provision for Income Taxes 0 (475,724)
--------- ----------
Total Provision for Income Taxes 0 661,824
--------- ----------
The tax effects of temporary differences which
give rise to deferred income by assets and
liabilities consist of the following:
Deferred income tax assets:
Net operating loss 0 683,201
Valuation allowance 0 (207,477)
--------- ----------
475,724
--------- ----------
Deferred income tax liabilities
Installment sale method on Notes Payable 0 1,137,548
Valuation allowance (0) (475,724)
--------- ----------
Net deferred tax asset liability 0 661,827
--------- ----------
The Company has net operating losses (NOLs) at
December 31, 1998 of approximately $4,730,842.
These NOLs expire as follows:
2010 $ 70,912
2011 1,191,269
2012 635,367
2018 2,833,294
----------
$4,730,842
----------
The Company has capital loss carryover of $46,036
which will expire as follows:
2002 $ 14,238
2003 31,798
----------
$ 46,036
----------
Realization of deferred tax assets associated with the NOLs
and net capital loss carryover is dependent on generating
sufficient taxable income prior to their expiration. Due
to the uncertainty of the Company=s ability to generate
such income with the possibility that these carryovers may
expire unused, management has established a valuation
account against them.
<PAGE>
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
1999 1998
------- -------
Cash used for:
Interest $ 4,275 $17,520
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:
1999 1998
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
Note Receivable $ 0 $ 0 $1,584,595 $1,584,595
Long Term Investments $ 0 $ 0 $ 196,455 $ 196,455
Accounts Payable $ 486,917 $ 486,917 $ 154,997 $ 154,997
Equipment Lease Payments $ 284,383 $ 255,945 $ 360,353 $ 331,125
Notes Payable $1,564,979 $1,564,979 $2,330,188 $2,330,188
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 $6,350 per month and expired February 28, 2002.
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.
<PAGE>
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 31, 1999 when the lease terminates.
Details of lease obligations are as follows:
Capitalized Capitalized Operating
Equipment Equipment Transponder Building
Lease #1 Lease #2 Lease Lease
----------- ----------- ----------- --------
1999 $ 92,817 $ 38,718 $ 210,000 $ 57,150
2000 $ 87,493 $ 21,510 76,200
2001 76,200
2002 19,050
NOTE 7 - RELATED PARTIES
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:
1999 1998
Funds Funds
----------------------------------------
Borrowed Repaid Borrowed Repaid
--------- ------- --------- -------
Cleveland Broadcasting $ 500 $ 0 $ 0 $1,222
San Antonio Broadcasting $ 0 $ 0 $ 0 $ 0
TV Channel 22 $ 0 $ 0 $ 0 $1,500
ATN Network $ 0 $ 0 $ 0 $3,028
Shelley Media Marketing $ 29,950 $18,000 $ 0 $ 0
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:
<PAGE>
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to Common Stock
in 1998 at the rate of two common for each Preferred B,
which would equal 22,000 shares of common stock (11,000)
--------
Number of Preferred B Shares outstanding at December 31, 1998 42,427
--------
NOTE 9 - SENIOR CHANNEL
The Company acquired the Copyright to the Senior Channel in exchange for
accounts receivable in the amount of $689,680 due to the Company from the owners
of the Senior Channel Copyright. The Senior Channel has twenty four hour
programming per day. There was no gain or loss recognized when accounts
receivable for the Senior Channel was converted into Investment in Senior
Channel. The Company=s projections indicate that 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 three
months ended March 31, 1999 was $34,484 and the cumulative amortization at March
31, 1999 was $172,420.
NOTE 10 - INVESTMENT IN COMMON STOCK
The Company owned 368,100 shares of Quick Tent, Inc. (NASD Small Cap QTNT)at
March 31, 1998. The Company sold Quick Tent, Inc. stock in 1998 resulting in a
loss of $31,748. This investment is included in Other Assets at March 31, 1998.
NOTE 11- FILM LIBRARY
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $12,745.
NOTE 12 - BRIDGE LOAN
In the quarter ended March 31, 1999, Bridge Loans in the amount of $50,000 were
converted into 62,500 shares of common stock of the Company at an average price
of $0.80 per share. In 1998 Bridge Loans in the amount of $333,750 were
converted into 450,731 Common Shares at an average price of $0.74 per share. An
additional 134,602 shares were issued to equalize the conversion price with the
market price in 1998, and 372,880 shares were issued to equalize the conversion
price with the market price in 1999.
NOTE 13 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED BY
INCREASE IN NOTES PAYABLE
Notes Payable 1998 $1,603,529
Notes Payable 1999 1,564,979
-----------
Net Change (38,550)
Notes paid by Conversion to Common Stock 50,000
-----------
Cash Flow generated by Note Payable $ 11,450
-----------
<PAGE>
NOTE 14 - CAPITAL STOCK
During 1998, the Company declared a 1 for 5 reverse split in its common
stock. At the time of the reverse in November 1998, there were 19,987,526
shares outstanding. After adjusting the outstanding shares for the 1 for
5 reverse split, there were 3,997,521 shares outstanding.
NOTE 15 - STOCK ISSUED FOR FINANCING
The Company issued 3,400,000 shares (680,000 post-split shares) of common stock
for no consideration for which the Company was to receive financing. As
financing has not materialized, the Company is in the process of retrieving the
stock.
NOTE 16 - DEBT FORGIVENESS BY AFFILIATE
An affiliated company forgave its debt from American Independent Network, Inc.
in the amount of $688,734 in 1998. Pursuant to Accounting Principal Board
Opinion Number 26, the amount was treated as a contribution to capital. There
was no tax effect as the Company has no tax asset or liability.
NOTE 17 - LEGAL MATTERS
The Company has had several judgments rendered against it. One judgment has
resulted in a receivership in March 1999. Judgments in place at March 31, 1999
are as follows:
<TABLE>
<CAPTION>
Judgment Entered For
----------------------
<S> <C> <C>
Witner, P. $ 11,921
Hall, Estill, Hardwick & Gable 29,862
New Image Video 90,000
Tarrant County Appraisal District 18,000 (Since settled and subject to a
payment schedule with a balance due of $8,000)
Ira Weingarten/Equity Communications 60,000
Showplace Broadcasting 56,000 (Since settled with owner of judgment)
--------
$265,783
<FN>
These amounts have been accounted for in accounts payable.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis
Forward Looking Statement and Information
This Management Discussion and Analysis contains various forward looking
statements which represent the Company's expectations or beliefs concerning
future events and involve a number of risks and uncertainties. Important
factors that could cause actual results to differ materially from those
indicated include risks and uncertainties relating to demographic changes;
existing government regulations and changes in, or the failure to comply with
government regulations; competition; the loss of any significant numbers of
subscribers or viewers; changes in business strategy or development plans;
technological developments and difficulties (including any associated with the
Year 2000); the ability to attract and retain qualified personnel; significant
indebtedness; the availability and terms of capital to fund the expansion of our
businesses. The Company has no obligation to update or revise these forward
looking statements to reflect the occurrence of future events or circumstances.
General
The Company was founded on December 11, 1992 and provides programming,
media production and syndication services to television arid cable stations, as
well as satellite uplink services to certain cable channels. The Company has a
wholly-owned subsidiary, Eureka Media & Trading, Inc., formed in the State of
Nevada on September 6, 1995, which has not commenced operations. In 1998, the
Company changed the name of its subsidiary to "Senior Channel, Inc."
The Company originally broadcast its programs via analog transmission and,
in 1996, had Affiliate Agreements with over 150 Affiliate Stations. However, in
late 1996, the Company converted from analog to digital transmission and in
connection with the conversion, was required to provide digital decoding
equipment to each of its Affiliate Stations. Due to the cost of providing the
decoding equipment, the Company was not able to furnish the equipment to all of
its then existing Affiliate Stations. Accordingly, upon conversion, the Company
initially entered into Affiliate Agreements with 33 Affiliate Stations. The
Company has since entered into Affiliate Agreements to provide family-oriented
television to a network of 25 broadcast television stations and cable systems
nationwide. The stations serviced by the Company are primarily "independent"
broadcast stations, meaning that they have no affiliation with the major network
organizations (NBC; ABC; CBS; Fox; WB Network; and Paramount). The Company
maintains a library of over 2,000 programs covering a wide array of topics and
interests, and includes cartoons, sports, sitcoms, movies, news and weather,
comedy, science and health shows, documentaries, and public interest programs.
The Company also offers original programs, celebrity golf tournaments.
professional boxing, fishing expeditions and interactive programming.
<PAGE>
Result of Operations:
- ----------------------
Revenues.
For the three months ended March 31, 1999, revenues were $33,464 and for
the comparable three month period in 1998, revenues were $53,463. The decrease
in 1999 revenues was due primarily to a decrease in 1999 in satellite channel
lease revenues.
Cost of Operations.
For the three months ended March 31, 1999 and March 31, 1998, cost of
operations were $112,998 and $115,273, respectively. The $2,275 decrease in
cost of operations for the three months ended March 31, 1999, is due primarily
to $1,973 decrease in production expenses.
General and Administrative.
For the three months ended March 31, 1999 general and administrative
expenses were $47,340 and for the three months ended March 31, 1998, general and
administrative expenses were $126,125. The $78,785 decrease in general and
administrative expenses for the three months ended March 31, 1999 is due
primarily to decreases in labor of $36,437, in telephone of $9,852, in
transportation of $24,977, in office supplies of $3,759 and in sales tax of
$3,939.
Operating Loss.
For the three months ended March 31, 1999, the Company=s operating losses
were $198,526 and for the comparable period in 1998, the Company=s operating
losses were $218,955. The loss before income taxes and extraordinary items for
the three months ended March 31, 1999 was $246,848 as compared to a loss before
income taxes and extraordinary items for the three months ended March 31, 1998
of $303,921. Net loss for the three months ended March 31, 1999 was $286,472 as
compared to a net loss for the three months ended March 31, 1998 of $321,307.
The $34,835 decrease in the loss before income taxes and extraordinary item in
1999 is due primarily to $78,785 decrease in general and administrative
expenses, $36,644 decrease in other expenses being more than the decrease in
revenues caused by the decrease in satellite channel lease revenues and the
increase in cost of conversion of bridge loans and preferred stock.
Net Loss.
For the three months ended March 31, 1999 and March 31, 1998, net loss per
share was $.06 and $.02, respectively.
<PAGE>
Liquidity and Capital Resources
- ----------------------------------
The Company has financed its operations through a combination of the
issuance of equity securities to private investors, issuance of private debt,
loans from affiliates, and cash flow from operations. The Company has
cumulative losses of $6,594,702 from inception through March 31, 1999.
Current liabilities at March 31, 1999 were $2,634,733, which exceed current
assets of $35,683 by $2,599,050. Current liabilities at March 31, 1998 exceeded
current assets by $2,077,106. The decrease in current assets in 1999 as
compared to 1998 was primarily the result of the removal of the note receivable.
The current liabilities at March 31, 1999 decreased by $268,991 as compared to
March 31, 1998 due primarily to decreases in notes payable and accrued interest
of $603,547 and increase in accounts payable of $331,920.
The Company has been able to generate funds from private placements to
finance operations, however, in the event the Company requires additional
capital investments, there can be no assurance that a sufficient amount of the
Company's securities can be sold to fund the continuing operating needs of the
Company.
Management believes that anticipated cash flows from operations will be
sufficient to meet the Company's expected cash needs and to finance future
operations, however, in the event that future revenues are not sufficient, the
Company will conduct private and/or public offerings of its equity stock or
enter into bridge loan financing to raise the necessary capital.
Impact of Inflation
- ---------------------
Management does not believe that general inflation has had or will have a
material effect on operations.
Year 2000 Issues
- ------------------
The Company has conducted a comprehensive review of its computer systems to
identify any business functions that could be affected by the "Year 2000" issue.
As the millennium ("Year 2000") approaches, businesses may experience problems
as the result of computer programs being written using two digits rather than
four to define the applicable year. The Company has conducted a comprehensive
review of its computer systems to identify those areas that could be affected by
the "Year 2000" issue. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If not corrected, this could result in extensive miscalculations or a
major system failure.
The Company relies on industry standard software. Certain manufacturers
have already provided the Company with upgraded software to address the "Year
2000" issue and the Company believes that its remaining software manufacturers
will modify their programs accordingly. In the event the remaining
manufacturers do not upgrade their software packages, the Company will replace
such software with programs that address the "Year 2000" issue. The Company
believes that by modifying existing software and converting to new software, the
"Year 2000" issue will not pose significant operational problems and is not
anticipated to require additional expenditures that would materially impact its
financial position or results of operations in any given year.
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended March 31, 1999, one person who as a bridge loan
creditor converted its debt into a total of 62,500 shares of common stock of the
Company. As a result of this transaction, approximately $50,000 of debt was
extinguished. These conversions were effected by the Company in reliance upon
exemptions from registration under the Securities Act of 1933 as amended (the
"Act") as provided in Section 4(2) and thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions. None of the transactions involved a public
offering. These conversions were the result of negotiations between the Company
and the creditors and the holders. The Company believes that each of the
persons had knowledge and experience in financial and business matters which
allowed them to evaluate the merits and risk of the purchase of these securities
of the Company. The Company believes that each of these persons were
knowledgeable about the Company's operations and financial condition.
In April, 1999, the Company issued 500,000 shares of common stock to
Richard Halden as compensation as an employee of the Company. The Company
believes he had knowledge and experience in financial and business matters which
allowed him to evaluate the merits and risk of the receipt of these securities
of the Company. Mr. Halden is the operations manager of the Company in such
capacity he was were knowledgeable about the Company's operations and financial
condition.
In April, 1999, the Company issued 500,000 shares of common stock to Fred
Hoelke, who provided professional services to the Company. The Company believes
he had knowledge and experience in financial and business matters which allowed
him to evaluate the merits and risk of the receipt of these securities of the
Company. Mr. Hoelke provided professional services to the Company and in such
capacity he was knowledgeable about the Company's operations and financial
condition.
In April, 1999, the Company issued 150,000 shares of common stock to
Jonathan Moseley, the son of Randy Moseley. As a result of a matter decided in
binding arbitration, the Company had been a judgment debtor in a judgment styled
as Showplace Video v. American Independent Network, Inc., No. 98-2154-E, County
Court At Law No. 5, Dallas County, Texas. In 1998, Alan Luckett purchased the
judgment and released it in exchange for 500,000 shares of common stock of the
Company, and for access to the digital uplink equipment of the Company, certain
bandwidth of the satellite transponder the Company leases, and the right of
first refusal on the Company's transponder rights and equipment leases in the
event that the Company ceases operations. Also in connection with the release
of judgment by Alan Luckett, Randy Moseley agreed to turnover 728,748 shares
which he owned to the Company for cancellation in 1999, and, Don Shelton, a
former director and executive officer of the Company, agreed to turnover 669,618
shares which he owned to the Company for cancellation in 1999. Further in
connection with the release of judgment, the Company agreed to issue 150,000
shares of common stock of the Company to Jonathan Moseley, the son of Randy
Moseley. The Company believes that Jonathan Moseley was being advised in this
matter by his father, Randy Moseley and that he had knowledge and experience in
financial and business matters which allowed him to evaluate the merits and risk
of the receipt of these securities of the Company and he was knowledgeable about
the Company's operations and financial condition.
<PAGE>
In July, 1999, the Company entered into an agreement with Field of Cotton,
L.P. whereby Field of Cotton, L.P. purchased 6,500,000 shares of common stock of
the Company for a total consideration of $4,250,000, in the form of a promissory
note in the principal amount of $4,022,600, and $227,400 in cash in the form of
funds previously provided to the Company by Field of Cotton, L.P. in 1999. As a
result of this agreement, Field of Cotton, L.P. now owns 48.9% of the common
stock of the Company. Of these 6,500,000 shares, Field of Cotton, L.P. owns
1,000,000 shares outright free and clear, and the remaining 5,500,000 million
shares are subject to an escrow agreement and a security interest agreement in
favor of the Company. The terms of the promissory note are that 11 payments are
due commencing September 1, 1999 in the amount of $100,000 per payment, and a
balloon payment in the amount of $3,190,213 is due September 1, 2000 for the
remaining principal balance. The promissory note bears interest at the rate of
8% per annum in arrears. For each $100,000 payment that Field of Cotton L.P.
makes to the Company, 200,000 shares are released from escrow to Field of
Cotton, L.P. and are no longer subject to the security agreement. The Company
believes that Field of Cotton, L.P. had knowledge and experience in financial
and business matters which allowed it to evaluate the merits and risk of the
purchase of these securities of the Company. The Company believes that Field of
Cotton, L.P. had knowledgeable about the Company's operations and financial
condition. This transaction was effected by the Company in reliance upon
exemptions from registration under the Securities Act of 1933 as amended (the
"Act") as provided in Section 4(2) and thereof. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions. This transaction did not involve a public
offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)
Exhibit Number Title of Exhibit
--------------- ------------------
27.1 Financial Data Schedule
(b) The Company did not file any Current Reports on Form 8-K during the
fiscal quarter ended March 31, 1999.
<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.
July 26, 1999 /s/ Randy Moseley
------------------------------
Randy Moseley
Director, President
and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) AUDITED
FINANCIAL STATEMENTS FOR THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) QUARTERLY REPORT ON FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 595
<SECURITIES> 0
<RECEIVABLES> 5088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35683
<PP&E> 998946
<DEPRECIATION> 213008
<TOTAL-ASSETS> 1573615
<CURRENT-LIABILITIES> 2637733
<BONDS> 0
<COMMON> 261529
0
42427
<OTHER-SE> (1474077)
<TOTAL-LIABILITY-AND-EQUITY> 1573615
<SALES> 0
<TOTAL-REVENUES> 33464
<CGS> 112998
<TOTAL-COSTS> 231990
<OTHER-EXPENSES> 48322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64275
<INCOME-PRETAX> (246848)
<INCOME-TAX> 0
<INCOME-CONTINUING> (246848)
<DISCONTINUED> 0
<EXTRAORDINARY> 39624
<CHANGES> 0
<NET-INCOME> (286472)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
