QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
______________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission file number 0-18612
I.R.S. Employer Identification Number 84-1062555
TV COMMUNICATIONS NETWORK, INC.
(a Colorado Corporation)
10020 E. Girard Avenue, #300
Denver, Colorado 80231
Telephone: (303) 751-2900
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for
the past 90 days. Yes XX No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
17,981,133 shares of the Company's Common Stock ($.0005 par value)
were outstanding as of September 30, 1995.
Index
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet as of September 30, 1995
(unaudited) 4
Statements of Operations for the Three months and Six
months ended September 30, 1995 (unaudited) 6
Statements of Cash Flow for the Six months ended
September 30, 1995 (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information 14
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Consolidated Balance Sheet
September 30, 1995 (Unaudited)
<CAPTION>
September
30,
March 31,
1995
1995
Assets
<S>
<C>
<C>
Current assets
Cash
$ 1,820,450
$ 1,091,396
Investments
2,181,631
2,155,370
Accounts receivable
83,507
56,260
Prepaid expenses
104,864
8,080
Inventory
207,457
169,145
Current portion of notes
2,476,291
2,335,006
Current portion of def. income taxes
423,253
745,649
Total current assets
7,297,453
6,560,906
Property and equipment - net
2,124,277
2,064,733
Other assets
Notes receivable
2,796,890
4,274,537
Mountain house mine
366,880
327,392
License agreements - net
132,640
181,282
Other assets
4,135
4,135
Deferred income taxes
86,626
342,284
Advance
657,123
413,318
Total other assets
4,044,294
5,542,948
Total assets
$ 13,466,024
$ 14,168,587
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
$ 696,088
$ 750,834
Accrued expenses
60,000
207,286
Current portion of long-term debt
28,877
150,438
Current deferred gain
1,091,926
2,201,277
Taxes payable
300,000
116,623
Advances from stockholders
1,123,258
1,512,230
Subscriber deposits
24,126
24,126
Total current liabilities
3,324,275
4,962,814
Long-term liabilities
Long-term debt
555,866
512,560
Long-term deferred gain
3,192,746
3,437,838
Contingencies
90,000
90,000
Total long-term liabilities
3,838,612
4,040,398
Stockholders' Equity
Class A preferred stock, $1 par value;
none issued or outstanding
-
-
Class B preferred stock, $1 par value;
28,813 shares issued and outstanding
28,813
28,813
Class C preferred stock, $1 par value;
780,000 shares issued and outstanding
780,000
780,000
Class D preferred stock, $1 par value;
4,864,000 shares issued and
outstanding
152,000
152,000
Common Stock,$.0005 par value;
100,000,000 shares authorized,
17,981,133 shares issued and
outstanding
9,016
9,016
Additional Paid in Capital
6,575,211
6,575,211
Accumulated (Deficit)
(1,241,903)
(2,379,665)
Total Stockholder's Equity
6,303,137
5,165,375
Total Liabilities and Stockholder's
Equity
$ 13,466,024
$ 14,168,587
</TABLE>
<TABLE>
Consolidated Statement of Operations
Three Months Ended September 30, 1995 (Unaudited)
<CAPTION>
Three Months Ended
September
30,
1995
1994
<S>
<C>
<C>
Total revenue
$ 390,072
$ 425,563
Revenue - sold cable
Operations
1,632,126
263,985
2,022,198
689,548
Operating expenses
Salaries and wages
123,105
159,983
Programming fees
-
51,678
General and administrative
273,626
362,884
Depreciation and amortization
53,922
42,187
Interest
17,672
21,373
Total expenses
468,325
638,105
Income before income taxes
1,553,873
51,443
Estimated income taxes
621,549
17,500
Income after income taxes
$ 932,324
$ 33,943
Net income per common share
$ .05
$ -
</TABLE>
<TABLE>
Consolidated Statement of Operations
Six Months Ended September 30, 1995 (Unaudited)
<CAPTION>
Six Months Ended
September
30,
1995
1994
<S>
<C>
<C>
Revenue
$ 883,738
$ 1,206,595
Revenue - sold cable
Operations
1,986,225
1,206,883
2,869,963
2,308,478
Operating expenses
Salaries and wages
317,812
268,624
Programming fees
300
64,062
General administration
523,530
785,446
Depreciation and amortization
97,678
77,186
Interest
34,374
45,409
Total expenses
973,694
1,240,727
Income before income taxes
1,896,269
1,067,751
Estimated income taxes
758,507
363,000
Income after income taxes
$ 1,137,762
$ 704,751
Net income per common share
$ .06
$ 0.04
</TABLE>
<TABLE>
Condensed Consolidated Statement of Cash Flows
Six Months Ended September 30, 1995 (Unaudited)
<CAPTION>
Six Months Ended
September 30,
1995
1994
<S>
<C>
<C>
Cash flow from operating activities
Net income
$ 1,137,762
$ 704,751
Adjustment to reconcile net income to
net cash used in operating activities
Depreciation and amortization
97,678
77,186
Deferred gain
(2,065,814)
(1,026,883)
Deferred income taxes
578,054
345,690
Change in certain assets and
liabilities
Accounts receivable
(27,247)
139,627
Prepaid expenses
(96,784)
(217,006)
Taxes payable
183,376
(259,380)
Inventory
(38,312)
(78,024)
Accounts payable
(54,746)
(664,865)
Accrued expenses
(147,286)
(94,441)
Subscriber deposits
-
11,008
(1,571,081)
(1,767,089)
Cash flows used in operating
activities
(433,319)
(1,062,338)
Cash flows from investing activities
Investments
(26,261)
-
Development of mine
(39,488)
(42,220)
Property & equipment
(107,971)
(115,524)
Notes receivable
2,047,734
1,430,321
Advance
(243,805)
-
Other
-
(44,465)
Cash flows provided by investing
activities
1,630,209
1,228,112
Cash flows from financing activities
Payments of stockholder advances
(388,972)
(300,089)
Long-term debt
(78,255)
(33,747)
License agreements
(609)
(695)
Cash flows used in financing
activities
(467,836)
(334,531)
Net Increase (decrease) in cash
729,054
(168,757)
Cash - beginning of year
1,091,396
3,574,038
Cash - end of Period
$ 1,820,450
$ 3,405,281
Note 1 - Summary of Significant Accounting Policies
The summary of the Company's significant accounting policies are
incorporated by reference from TV Communications Network, Inc.,
Annual Report on Form 10-KSB dated June 29, 1995 for Fiscal Year
ended March 31, 1995.
The accompanying unaudited consolidated financial statements include
the accounts of TV Communications Network, Inc., and its wholly-owned
subsidiaries. All material and inter-company accounts and
transactions have been eliminated in consolidation.
Interim Unaudited Financial Statements
Information with respect to September 30, 1995, and September 30,
1994, and the periods then ended have not been audited by the
Company's independent auditors, but, in the opinion of management,
reflect all adjustments (which include only normal recurring
adjustments) necessary for the fair presentation of the operations of
the Company. The results of operations for the three months and six
months ended September 30, 1995, and September 30, 1994, are not
necessarily indicative of the results of the entire fiscal year.
The preparation of the interim report is based on the same accounting
standards, and the statements are in conformity with Generally
Accepted Accounting Principles (GAAP). Management believes there are
no material misstatements.
Earnings Per Share
Net income per common share is based on the weighted average number
of 17,981,133 common shares outstanding for 1995 and 1994.
Income Tax
From its inception on July 7, 1987, the Company incurred operating
losses through March 31, 1993, which included certain accrued
expenses that are not deductible for tax purposes until paid, and has
net operating loss carry forwards available to offset future year
taxable income. The following summarizes these losses and their
expiration after the utilization of $1.3 million of the net operating
loss carry forward in the year ended March 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
Net
Operating
Loss
Year of
Carryforwa
rd
Expiration
<S>
<C>
<C>
Year ended March 31, 1993
$ 1,700,000
2008
</TABLE
Note 1 - Summary of Significant Accounting Policies (continued)
Stockholders' Equity
The options granted by the Company to Century 21 shareholders
originally expired as of November 30, 1994. However, the Company
extended said options to the benefit of the Century 21 shareholders
under the following terms:
TVCN's transfer agent would issue Option Certificates to evidence the
rights under the TVCN Agreement. However, the respective number of
shares has changed since 1989. At the Special Meeting of TVCN
Shareholders on December 17, 1991 the majority of shareholders of
TVCN passed a resolution authorizing a five-to-one (5-1) reverse-
stock split plan for the Company's Common Stock. Prior to effecting
the reverse split, the total number of shares of Common Stock issued
and outstanding was 75,879,665. Immediately following the reverse
stock split, the total number of such issued and outstanding shares
was 15,175,933. The plan did not favor or discriminate against any
group of shareholders and applied equally to all shareholders and
persons holding rights to acquire common stock. Accordingly, for
those who selected Option A for Preferred Shares, the old conversion
rate of two Preferred Shares for one share of Common Stock has been
adjusted to implement the five-to-one reverse-split (e.g., there was
a conversion right of 10,000 shares of Preferred Shares for 5,000
shares of Common Stock, now there is a conversion right to 1,000
shares of Common Stock.) If Option B was selected, now the exchange
of 32 shares of Century 21 stock for 5 options to purchase 5 shares
of Common stock at $0.37 per share is adjusted so that the five (5)
options are one (1) option and the option price per share is $1.85
(five times $0.37).
The Option Certificate provides that the option deadline to either
convert Preferred Shares to Common Stock or to purchase Common Stock
has been extended three years from November 30, 1994 to November 30,
1997. These Option Certificates are not transferable.
TVCN is extending the Options for three years, and the underlying
common shares are restricted from public sale for two years from the
date of issuance of common stock under the options or the effective
date of registration of such shares with the SEC, according to which
event occurs first. TVCN may, but is not obligated to, register
these shares for public trading through the SEC.
Item 2 - Management's Discussion and Analysis of Financial Conditions
and Results of Operations
Total Revenues
The total revenue for the quarter ended September 30, 1995, was
$2,022,198 as compared to $689,548 during the quarter ended September
30, 1994 and for the two quarters ended September 30, 1995 was
$2,869,963 as compared to $2,308,478 for the two quarters ended
September 30, 1994. The increase was due to the note pay off and the
recognition of the deferred gain from the sale of the Washington,
D.C. station.
Operating Expenses
Total operating expenses for the three and six months ended September
30, 1995, are $468,325 and $973,694 as compared to $638,105 and
$1,240,727 for the three and six months ended September 30, 1994.
The decreases in expenses of $169,780 and $267,033 are summarized as
follows:
</TABLE>
<TABLE>
<CAPTION>
Three
Months
Six
months
<S>
<C>
<C>
Change in salaries and wages
$ (36,878)
$ 49,188
Decrease in programming fees
(51,678)
(63,762)
Decrease in general & administrative
expense
(89,258)
(261,917)
Increase in depreciation and
amortization
11,735
20,492
Decrease in interest expense
(3,701)
(11,035)
Net (decrease) in total expenses
$ (169,780)
$ (267,033)
</TABLE>
The increase in salary & wages and expenses is due to the increased
time spent in developing new areas of operations and defending
lawsuits. The decrease in general & administrative expenses are due
to decreased consulting charges.
Net Income
The net income after income tax estimate for the three and six months
ended September 30, 1995 was $932,324 and $1,137,762 as compared to
$33,943 and $704,751 during the three and six months ended September,
1994. The increased income during the first two quarters ended
September 30, 1995, is due to the note payment and the recognition of
revenue from the sale of cable operations in Washington, D.C. The
lower operating costs also contributed to the increase.
Item 2 - Management's Discussion and Analysis of Financial Conditions
and Results of Operations (continued)
Liquidity and Capital Resources
The Company initially financed its growth through loans and the sale
of stock. The Company will finance its future growth primarily from
the sale of domestic operations. To date, the Company has not engaged
in any debt financing. Instead, it has relied on individual or group
investments. The company's cash flow for the six months ended
September 30, 1995, and September 30, 1994, are summarized as
follows:
<TABLE>
<CAPTION>
September
30,
1995
1994
(Unaudited)
<S>
<C>
<C>
Cash flow from operating activities
$ (433,319)
$ (1,062,338)
Cash flow from investing activities
1,630,209
1,228,112
Cash flow from financing Activities
(467,836)
(334,531)
Cash - beginning of period
1,091,396
3,574,038
Cash - end of period
$ 1,820,450
$ 3,405,281
</TABLE>
The sales of the Denver, Colorado, Washington, D.C., and Detroit,
Michigan systems for approximately $17.5 million with a resulting
gain of $15.5 million are expected to adequately cover the Company's
current liabilities along with allowing the Company to develop other
wireless cable TV markets in the United States and explore other
business opportunities domestically and internationally.
Currently, the Company has $584,743 in long term debt which is
primarily for the purchase of the TVCN corporate headquarters
building in Denver, Colorado.
The Company's current assets and liabilities are $7,297,453 and
$3,324,275, respectively. The Company's cash position is such that
management anticipates no difficulty in its ability to meet its
current obligations. The company currently has $2,181,631 invested
in government securities.
During fiscal year 1993, the Company raised $1,000,000.00 in equity
investment by sales of its common stock. The President, a
shareholder, and a Director, have advanced loans to the Company
totaling $1,123,258. No equity transactions have occurred in the
current fiscal year.
Item 2 - Management's Discussion and Analysis of Financial Conditions
and Results of Operations (continued)
Accounts Receivable and Payable
The decrease in notes receivable and accounts payable as of September
30, 1995 is due mainly to the payment of invoices and receipt of note
payments, respectively, during the first two quarters of the fiscal
year 1995.
Advance from Stockholders
During the period from March 31, 1995 to September 30, 1995, the
Company repaid advances from stockholders totalling $388,972.
Subscriber Deposits
The purchasers of the Denver and Detroit stations limited the
subscriber deposits assumed by purchasers to $50,000 and $114,000,
respectively. TVCN is responsible for subscriber deposits above
these amounts.
Item 1. - Legal Proceedings
(A) Shareholder Class Action Suit - TVCN is a defendant in a
class action suit entitled Merton Frederick, et.al. v.
TVCN, et.al. more fully discussed in the Company's latest
10-KSB filed on June 29, 1995. The class of plaintiffs has
not been certified by the court, and discovery is stayed
pending resolution of this issue. Motions for summary
judgment have been filed by the Company, but are still
pending. No date has been set for the trial. TVCN is
vigorously defending the case.
(B) On August 30, 1995, Eastern Cable Networks Corp.
("Eastern") and People's Choice TV Corp. ("PCTV") closed a
transaction pursuant to which Eastern purported to transfer
the Detroit WCTV station to PCTV. On September 27, 1995,
the Company filed a lawsuit in the District of Columbia
Superior Court seeking damages and to set the transaction
aside on the grounds that it violated the agreement
pursuant to which TVCN sold the Detroit station to Eastern
in 1994. The assets of the Detroit station secure a note
from Eastern to the Company in the amount of $3,909,110.
This litigation is in the preliminary stages and as of the
date of this filing, neither Eastern nor PCTV have filed
answers to the Company's complaint.
Item 2. - Changes in Securities
None.
Item 3. - Default Upon Senior Securities
None.
Item 4. - Submission of Matters to a Vote of Security Holders
The company held its annual Shareholder Meeting on September 22,
1995. Approximately 15,870,000 shares of the 17,981,133 shares
outstanding attended the meeting in person or by proxy. The
management suggested slate of three Directors was elected, and the
firm of Ehrhardt Keefe Steiner & Hottman PC was ratified as
independent auditors.
Item 4. - Submission of Matters to a Vote of Security Holders
(continued)
The votes in person or by proxy were:
<TABLE>
<CAPTION>
Directors
For
Against
Abstain
<S>
<C>
<C>
<C>
Omar A. Duwaik
15,795,976
43,107
30,795
Armand De Pizzol
15,809,156
42,077
18,645
Dennis J. Horner
15,809,866
42,317
17,695
Auditors
Ehrhardt Keefe Steiner &
Hottman PC
15,819,338
38,450
12,090
</TABLE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TV COMMUNICATIONS NETWORK, INC.
Date: November 13, 1995 /ss/Omar A. Duwaik
Omar A. Duwaik
PRESIDENT/CEO
/ss/Dennis J. Horner
Dennis J. Horner
VICE PRESIDENT/TREASURER
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TV COMMUNICATIONS NETWORK, INC.
Date: November 13, 1995
Omar A. Duwaik
PRESIDENT/CEO
Dennis J. Horner
VICE PRESIDENT/TREASURER
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
- - - 2 -
- - - 3 -
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
[FN]
See notes to financial statements.
- - - 4 -
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
- - - 15 -
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Part II. Other Information
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,820,450
<SECURITIES> 2,181,631
<RECEIVABLES> 83,507
<ALLOWANCES> 0
<INVENTORY> 207,457
<CURRENT-ASSETS> 7,297,453
<PP&E> 2,124,277
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,466,024
<CURRENT-LIABILITIES> 3,324,275
<BONDS> 3,838,612
<COMMON> 9,016
0
934,813
<OTHER-SE> 6,575,211
<TOTAL-LIABILITY-AND-EQUITY> 13,466,024
<SALES> 390,072
<TOTAL-REVENUES> 2,022,198
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 450,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,672
<INCOME-PRETAX> 1,553,873
<INCOME-TAX> 621,549
<INCOME-CONTINUING> 932,324
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 932,324
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
