UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1995
Commission File Number 0-18612
I.R.S Employer Identification Number 84-1062555
TV COMMUNICATIONS NETWORK, INC.
(A Colorado Corporation)
10020 East 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 Exchange Act of 1934 during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $0.0005 Par Value - 17,981,133 shares outstanding
as of December 31, 1995.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
TV COMMUNICATIONS NETWORK, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1995 AND 1994
(Unaudited)
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1995 December 31, 1994
__________________ _________________
<S> <C> <C>
Total Revenue $ 214,927 $ 433,967
Revenue-Sold Cable
Operations 338,962 1,314,296
_______ _________
$ 553,889 $ 1,748,263
======= =========
Operating Expenses:
Salaries and Wages $ 178,347 109,285
Programming Fees (4,106) 0
General and Administrative 137,105 188,808
Mining Operations 340,903 0
Depreciation and
Amortization 51,916 38,302
Interest 35,209 86,794
______ ______
Total Expenses $ 739,374 $ 423,189
======= =======
Income Before Income Taxes $ (185,485) $ 1,325,074
________ _______
Estimated Income Taxes $ (74,194) $ 522,000
_______ _______
Income After Income Taxes $ (111,291) $ 803,074
======= =======
Net Income (Loss) per share $ (.01) $ .04
======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
TV COMMUNICATIONS NETWORK, INC
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 1995 AND 1994
(Unaudited)
Nine Months Ended Nine Months Ended
December 31, 1995 December 31, 1994
_________________ _________________
<S> <C> <C>
Total Revenue $ 1,098,665 $ 1,715,562
Revenue-Sold Cable
Operations 2,325,186 2,341,179
______ ______
$ 3,423,851 $ 4,056,741
====== ======
Operating Expenses:
Salaries and Wages $ 496,159 $ 377,909
Programming Fees (3,806) 64,062
General and Administrative 660,635 977,152
Mining Operations 340,903 0
Depreciation and
Amortization 149,594 112,590
Interest 69,583 132,203
______ ______
Total Expenses $ 1,713,067 $ 1,663,916
====== ======
Income Before Income Taxes $ 1,710,784 $ 2,392,825
_______ _______
Estimated Income Taxes $ 684,313 $ 885,000
_______ _______
Income After Income Taxes $ 1,026,470 $ 1,507,825
_______ _______
Net Income per share $ .06 .08
======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
TV COMMUNICATIONS NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 (Unaudited)
<CAPTION>
December 31 March 31
1995 1995
______________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 1,551,153 $ 1,091,396
Investments 2,209,687 2,155,370
Accounts Receivable 95,357 56,260
Prepaid expenses 454,295 8,080
Inventory 207,457 169,145
Current Portion of Notes 2,825,317 2,335,006
Current Portion of Def. Tax 423,253 745,649
______ ______
Total Current Assets $ 7,766,519 $ 6,560,906
______ ______
Property, Plant and Equipment
-Net $ 2,116,331 $ 2,064,733
______ ______
Other Assets
Notes Receivable $ 2,042,415 $ 4,274,537
Mountain House Mine 0 327,392
License Agreements-Net 108,004 181,282
Other Assets 4,135 4,135
Deferred Income Taxes 86,626 342,284
Advance 717,376 413,318
______ ______
Total Other Assets $ 2,958,556 $ 5,542,948
______ ______
Total Assets $12,841,406 $ 14,168,587
======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts Payable $ 684,446 $ 750,834
Accrued Expenses 140,906 207,286
Current Portion of Long-Term Debt 32,153 150,438
Current Deferred Gain 1,091,926 2,201,277
Taxes Payable 230,036 116,623
Advances From Shareholders 1,001,439 1,512,230
Subscriber Deposits 24,126 24,126
______ ______
Total Current Liabilities $ 3,205,032 $ 4,962,814
Long Term Liabilities
Long-Term Debt $ 543,245 $ 512,560
Long-Term Deferred Gain 2,901,284 3,437,838
Contingencies 0 90,000
______ ______
Total Long-Term Liabilities $ 3,444,529 $ 4,040,398
Stockholder's Equity
Class A Preferred Stock, $1 par
value, none issued or
outstanding $ 0 $ 0
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, par value $.0005,
Authorized 100,000,000 shares
Issued and outstanding -
17,981,133 shares 9,016 9,016
Capital in excess of par value 6,575,211 6,575,211
Accumulated (Deficit) (1,353,195) (2,379,665)
_______ _______
Total Stockholders' Equity $ 6,191,845 $ 5,165,375
_______ _______
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 12,841,406 $ 14,168,587
======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
TV COMMUNICATIONS NETWORK, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
<CAPTION>
Nine Months Ended December 31
_____________________________
1995 1994
(Unaudited) (Unaudited)
______________ ____________
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 1,026,470 $ 1,507,825
Adjustments To Reconcile Net
Income to Net Cash Provided by
Operating Activities
Depreciation 149,594 112,590
Deferred Gain (1,645,905) (2,341,179)
Deferred Tax 578,054 885,000
Increase (Decrease) From Changes:
Accounts Receivable (39,097) (168,606)
Taxes Payable 113,413 (252,630)
Inventory (38,312) (95,024)
Prepaid Expenses (446,215) (4,720)
Accounts Payable (66,388) (754,936)
Accrued Expenses (66,380) (36,532)
Subscriber Deposits 0 10,992
_______ _______
Net Cash Used In Operating Activities $ (434,766) $(1,137,221)
_______ _______
Cash Flow From Investing Activities:
Investments $ (54,317) $ 0
Development of Mine 327,392 (48,320)
Property & Equipment (127,047) (173,327)
Notes Receivable 1,741,812 2,148,306
Advance (304,058) 0
Contingencies (90,000) 0
Other 0 (73,392)
_______ _______
Net Cash Used In
Investing Activities $ 1,493,782 $ 1,853,267
_______ _______
Cash Flow From Financing Activities:
Payment of Shareholder Debt $ (510,791) $ (280,796)
Long-Term Debt (87,600) (38,245)
License Agreements (868) (5,473)
_______ _______
Net Cash Provided From
Financing Activities $ (599,259) $ (324,514)
_______ _______
Net Increase (Decrease) in Cash $ 459,757 $ 391,532
Cash at Beginning of Year $ 1,091,396 $ 3,574,038
_______ _______
Cash at End of Period $ 1,551,153 $ 3,965,570
======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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 inter-company accounts and transactions have been
eliminated in consolidation.
Interim Unaudited Financial Statements
Information with respect to December 31, 1995, and December 31, 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 nine months ended December 31, 1995, and December 31,
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.
<PAGE>
Net Operating
Loss Carry Forward Year of Expiration
------------------ ------------------
Year ended March 1, 1993 $1,700,000 2008
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:
The respective number of shares underlying said options 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 shareholders of
Century 21 stock who selected Option A for Preferred Shares, the old
conversion rate of two TVCN Preferred Shares for one share of TVCN 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 to
purchase one share of TVCN Common Stock at $1.85 (five times $0.37) per
share.
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 Options 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.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Total Revenues
The total revenue for the quarter ended December 31, 1995, was $553,889 as
compared to $1,748,213 during the quarter ended December 31, 1994. The total
revenue for the three quarters ended December 31, 1995 was $3,423,851 as
compared to $4,056,741 for the three quarters ended December 31, 1994. The
decrease for the quarter was due to the note pay off and the recognition of
the deferred gain from the sale of the Washington, D.C. station in the second
quarter.
Operating Expenses
Total operating expenses for the three and nine months ended December 31,
1995, are $739,374 and $1,713,068 as compared to $423,189 and $1,663,916 for
the three and nine months ended December 31, 1994, respectively. The
increases in expenses of $316,185 and $49,152 are summarized as follows
Three months Nine months
Increase in Salaries and Wages 69,062 118,250
Decrease in Programming Fees (4,106) (67,868)
Decrease in General & Administrative Expense (51,703) (316,517)
Increase in Mining Operations 340,903 340,903
Increase in Depreciation and Amortization 13,614 37,004
Decrease in Interest Expense (51,585) (62,620)
NET INCREASE (DECREASE) IN TOTAL EXPENSES $ 316,185 $ 49,152
========= =========
The increase in salary & wages 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.
The increase in mining operations reflects expenses involved in developing
mining properties.
Net Gain
The net income (loss) after income tax estimate for the three and nine months
ended December 31, 1995 was $(111,291) and $1,026,470 as compared to $803,074
and $1,507,825 during the three and nine months ended December 31, 1994. The
decreased income during the first three quarters ended December 31, 1995, is
due to the prior recognition of revenue from the sale of cable operations,
and the recognition of expenses in mining operations. The lower operating
costs also contributed to the increase.
Income Taxes
See page 8 "Income Tax" note.
Estimated income taxes are calculated at 40% for both federal and state
obligations.
<PAGE>
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
relied on individual or group investments. The company's cash flow for the
nine months ended December 31, 1995, and December 31, 1994, are summarized as
Dec 31, 1995 Dec 31, 1994
Unaudited Unaudited
------------ ------------
Cash Flow From Operating Activities $ (434,766) $(1,137,221)
Cash Flow From Investing Activities 1,493,782 1,853,267
Cash Flow from Financing Activities (599,259) (324,514)
Cash - Beginning of Period 1,091,396 3,574,038
----------- -----------
Cash - End of Period $ 1,551,153 $ 3,965,570
The sales of the Denver, Colorado, Washington, D.C., and Detroit, Michigan
systems for approximately $19.6 million with a resulting gain of $17.6
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 $575,398 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 $7,766,519 and $3,205,032,
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 $2,209,687 in investments 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, advanced loans to the Company totaling $1,001,439. No equity
transactions have occurred in the current fiscal year.
Accounts Receivable and Payable
The decrease in notes receivable, and accounts payable as of December 31,
1995, is due mainly to the payment of invoices and receipt of note payments
during the first three quarters of the fiscal year 1995.
Advance from Stockholders
During the period from March 31, 1995 to December 31, 1995, the Company
repaid advances from stockholders totalling $510,791.
<PAGE>
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.
Mining Operations
The Company, through its subsidiary Mining & Energy International Corp.,
signed an option agreement with Big Trees' Trust to obtain the rights to
develop a mine in Nevada County, California. The term of the option is one
year, with an additional opportunity to sign a lease for a term of thirty
years. During the option period, the Company is required to pay $40,000 per
month as advance royalty or 15% of the value of the ores mined and sold,
whichever is greater. The Company has begun the development of the mine.
Overseas Operations
After the international peace and economic conference that was held in Jordan
during the last part of 1995, as attended by the US Secretary of State,
Commerce Secretary, Prime Minister of Israel, and many other heads of states
and foreign dignataries, it was apparent that there were many business
opportunities in the Middle East. At a special meeting of the Board of
Directors of the Company, held on December 13, 1995, it was decided to
empower Mr. Duwaik to explore investment opportunities, to enter into such
agreements as are necessary, and to invest in a "Holding Company", if the
business opportunities presented by such an investment were deemed to be in
the best interest of the Company.
<PAGE>
PART II. OTHER INFORMATION
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.
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
transferred 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 aside the transaction between Eastern and PCTV on the
ground 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. On January 12, 1996
the parties executed settlement agreements dated to be effective December 31,
1995. Pursuant to the settlement Eastern and PCTV paid the Company
$614,120.11 in cash; PCTV assumed the Note secured by the Detroit station,
PCTV's wholly-owned subsidiary signed a Note in favor of the Company in the
amount of $2.1 million, and the Company released Eastern from all
liabilities.
ITEM 2. Changes in Securities
None. See p. 9 for a discussion of Century 21, Inc., and potential future
changes.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote to the Security Holders during the third
quarter ended December 31, 1995.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
None.
<PAGE>
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: February 12, 1996
/ss/Omar A. Duwaik
Omar A. Duwaik
PRESIDENT/CEO
/ss/Dennis J. Horner
Dennis J. Horner
VICE PRESIDENT/TREASURER
