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 June 30, 1998
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 [X] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
41,188,454 shares of the Company's Common Stock ($.0005 par value)
were outstanding as of June 30, 1998.
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30, 1998
(unaudited) . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations for the
Three months ended June 30, 1998
(unaudited) . . . . . . . . . . . . . . . . . 6
Statements of Cash Flow for the Three
months ended June 30, 1998
(unaudited) . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1998 (Unaudited)
<TABLE>
<PAGE>
<CAPTION>
June 30, 1998 March 31, 1998
Unaudited
<S> <C> <C>
Current Assets:
Cash $ 630,948 $ 852,362
Investments 89,607 87,659
Accounts Receivable 46,686 39,498
Inventory 144,208 107,028
Current Portion of Notes 545,404 737,813
Current Portion of Def. Tax 151,188 151,188
Other Current Assets 151,661 96,071
Total Current Assets $ 1,759,702 $ 2,071,619
---------- -----------
Property and Equipment-Net $ 3,631,175 $ 3,579,109
--------- -----------
Other Assets:
Notes Receivable $ 2,343,500 $ 2,343,500
License Agreements - Net 1,544,674 1,598,800
Deferred Income Taxes 1,291,866 1,291,866
Other Assets 167,187 127,573
Total Other Assets 5,347,227 5,361,739
Total Assets $10,738,104 $11,012,467
============ ============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1998 March 31,1998
Unaudited
<S> <C> <C>
Current Liabilities:
Account Payable $ 365,430 $ 322,865
Accrued Expenses 602,297 630,250
Current portion of
Long-Term Debt 166,828 235,195
Current Deferred Gain 657,992 657,992
Taxes Payable -0- 21,850
Subscribers Deposits 24,455 24,630
--------- ---------
Total Current Liabilities $ 1,817,002 $ 1,892,782
Long-term Liabilities:
Long-term Debt $ 2,117,106 $ 1,938,483
Long-term Deferred Gain 2,343,500 2,343,500
Advances from Stockholder 909,226 904,304
---------- ----------
Total Liabilities $ 7,186,834 $ 7,079,069
---------- ----------
Stockholders' Equity
Class A preferred stock,
$1 Par value; no shares
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; no shares
outstanding -0- -0-
Class D preferred stock,
$1 par value; no shares
outstanding -0- -0-
Common Stock, $.0005 par
value; 100,000,000 shares
authorized, 41,188,454
outstanding 20,197 20,197
Additional Paid in Capital 7,281,889 7,281,889
Accumulated (Deficit) $(3,779,629) $(3,397,501)
---------- -----------
Total Stockholder's Equity $ 3,551,270 $ 3,933,398
---------- -----------
Total Liabilities and
Stockholder's Equity $10,738,104 $11,012,467
=========== ===========
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Unaudited Unaudited
3 Months Ended 3 Months Ended
June 30, 1998 June 30, 1997
-------------------------------
<S> <C> <C>
Revenue - Operations $ 300,531 $ 317,940
Revenue - Sold Cable
Operations 355,290 328,233
Revenue - Sold Station -0- 2,000,000
---------- --------
Total Revenue $ 655,821 $ 2,646,173
========== ===========
Operating Expenses: Profit
Salaries and Wages 268,228 295,582
Programming Fees 12,418 26,180
Cost of Goods Sold 44,675 30,439
Mine Development 26,104 432,740
General and Administration 473,065 327,627
Depreciation and Amortization 153,964 106,704
Interest 56,375 56,121
-------- ---------
Total Expenses $1,034,829 $ 1,275,393
--------- --------
Income Before Income Taxes $ (379,008) $ 1,370,780
--------- -----------
Estimated Income Taxes $ 3,120 $ 476,000
--------- ----------
Income After Income Tax $ (382,128) $ 894,780
========== ==========
Net Income Per Common Share $ (.01) $ .02
Total Outstanding ========== ==========
Net Income Per Common share
Weighted Average $ .04
===========
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
Three Months Ended June 30, 1998 (Unaudited)
Three Months Ended
June 30
1998 1997
Unaudited Unaudited
Cash Flow From Operating Activities
Net Income (loss) $ (382,128) $ 894,780
Depreciation and Amortization 153,963 106,614
Change in certain assets and liabilities
Accounts Receivable (7,188) 5,452
Taxes Payable (21,850) 33,845
Inventory (37,180) -0-
Prepaid Expenses -0- (134,238)
Accounts Payable 42,565 (61,830)
Accrued Expenses (27,954) (148,620)
Subscriber Deposits (175) (151)
Deferred Gain -0- (328,233)
Deferred Taxes $ -0- $ 476,000
-------- ---------
Cash flows used in operating
activities $ (279,947) $ 843,619
---------- ----------
Cash Flows From Investing Activities:
Investments $ (1,948) $ 359,601
Property & Equipment (151,905) (118,104)
Notes Receivable 192,409 769,753
Other (95,202) (4,292)
-------- --------
Cash Flows provided by
investing activities $ (56,644) $1,006,958
Cash Flows From Financing Activities:
Payments of Stockholder Advances 4,922 (31,610)
Long-term Debt 110,255 338,274
License Agreements $ -0- $ (352,133)
-------- ---------
Cash flows used in
financing activities $ 115,177 $ (45,469)
-------- --------
Net Increase (decrease) in cash (221,414) 1,805,108
Cash - Beginning of Year 852,362 490,985
-------- ---------
Cash - End of Period $ 630,948 $ 2,296,093
========= ==========
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
June 30, 1998 and 1997 (Unaudited)
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 July 22, 1998 for Fiscal Year
ended March 31, 1998.
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 June 30, 1998, and June 30, 1997, 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 ended June
30, 1998, and June 30, 1997, 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 41,188,454 and 22,940,855 common shares outstanding for 1998 and
1997, respectively.
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.
Net Operating
Loss Year of
Year Ended March 31, 1993 Carry-forward Expiration
$3,900,000 2013
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Wireless Cable Operations
Salina, Kansas. TVCN is currently operating the Salina station
which broadcasts on 19 channels to a base of 530 subscribers and
has two employees. Zenith scrambling equipment was introduced
into the Salina head-end equipment in November and December, 1996,
each subscriber's household received a new descrambler (set-top
converter), and the Company added ESPN, Showtime and Flix to its
programming package.
Mobile, Alabama. The Company's Mobile, Alabama license is operated
by Mobile Wireless TV. For the use of this license the Company
received two cash payments totaling of $200,000. In addition, the
Company receives a transmission fee which is the greater of $2,000
per month; $0.50 per subscriber per month; or two percent of the
gross monthly revenues of the station.
Woodward, Oklahoma. The Company's Woodward, Oklahoma license is
the fifth license acquired by the Company from MDA, Inc., an
affiliated company. The Company leased the station to a non-
affiliated entity at the rate of $500 per month for a period of
one year, ending March 31, 1999.
San Luis Obispo, California. The Company has been granted six
additional channels in San Luis Obispo. In addition, the Company
purchased the rights to all three of the "H" channels for a total
of $20,000 and the FCC has approved the transfer of these channels.
Currently, the Company is broadcasting on seven channels to 47
subscribers in the San Luis Obispo area.
Other Stations. The Company also owns a WCTV station in Hays,
Kansas. In cooperation with its affiliate, Multichannel
Distribution of American, Inc. ("MDA") the Company has constructed
four channel WCTV stations in Myrtle Beach, South Carolina; Quincy,
Illinois; and Scottsbluff, Nebraska. None of these stations has
been leased.
In addition, in an effort to expand its concentration of WCTV
stations in the West Virginia and Pennsylvania areas, the Company
has applied for five vacant channels in the Scranton/Wilkes-Barre
/Hazelton BTA, four of which have been licensed to the Company by
the FCC. The fifth channel application is still pending.
Sale of WCTV Stations
Detroit, Michigan
In 1994 the Company sold its WCTV station in Detroit, Michigan to
Eastern Cable Networks of Michigan, Inc. ("ECNM"), a subsidiary of
ECNC. The consideration received by TVCN was $11,000,000.00
payable as follows: (1) a deposit of $250,000; (2) $2.25 million
cash at closing; (3) $500,000 90 days after closing; (4) up to
$2.0 million payable as a function of ECNMs ability to
successfully expand its services; (5) $500,000 nine months after
closing; and (6) a $5.5 million promissory note secured by a lien
upon the entire station.
On August 30, 1995, ECNM sold the Detroit station to a subsidiary
of People's Choice TV ("PCTV"). In September 1995 the Company
filed a lawsuit in the District of Columbia Superior Court seeking
damages and to set aside the transaction on the grounds that it
violated the agreement pursuant to which TVCN sold the Detroit
station to ECNM in 1994. On January 12, 1996 the parties settled
the lawsuit effective December 31, 1995. Pursuant to the
settlement, the Company released ECNC from all liability and
consented to PCTV's assumption of the note secured by the Detroit
station (the "Original Detroit Note"). In return, ECNC and PCTV
paid the Company $614,120 in cash; PCTV assumed the Original
Detroit Note; and one of PCTV's wholly-owned subsidiaries executed
a second note (the "Additional Detroit Note") in favor of the
Company in the amount of $2.15 million. As of June 30, 1998 the
total outstanding deferred purchase price of the Detroit station
was $2,705,896 consisting of the $362,936 principal balance of
the Original Detroit Note and the $2,343,500 principal balance of
the Additional Detroit Note.
Denver, Colorado
In December 1993 the Company sold its Denver, Colorado WCTV station
to American Telecasting, Inc. (ATI), of Colorado Springs,
Colorado. The gross purchase price was determined pursuant to a
contractual formula to be $6,073,500. After adjustments, the net
purchase price was $5,868,434, payable as follows: (1) $250,000 at
execution of the sales agreement (2) $1,500,000 at closing (3)
$250,000 30 days after closing, and (4) the balance of $3,868,634
is payable at eight percent (8%) interest in monthly interest only
payments for the first year, $50,000 per month plus interest for
the second year, $125,000.00 per month plus interest for the third
year, $83,333 per month plus interest for the fourth year, and
$64,036.50 per month plus interest for the fifth year.
After the closing a dispute arose between the Company and ATI
concerning a number of post-closing contractual price adjustments.
On October 2, 1995 ATI and the Company settled this dispute, and
pursuant to the settlement agreement ATI paid the Company $47,500,
and the parties released one another from all liabilities, except
ATI is still liable to the Company for the promissory note secured
by the Denver station. The Company purchased the F-Group lease from
ATI in Scranton, PA in exchange for a reduction in the Denver note,
or $195,705. As of June 30, 1998 the outstanding principal amount
of this note was $188,514.
Mining Business
Mining and Energy International Corp./Liberty Hill Mine
Mining and Energy International Corp./Liberty Hill Mine - On
September 2, 1997 the company's subsidiary, Mining and Energy
International Corp. ("MEICO") entered into two agreements with
"Big Trees' Trust" and "Naylor 1996 Charitable Remainder Trust under
date of December 30, 1996," of Applegate, California (collectively,
"Big Trees Trust") concerning the Liberty Hill Mine in Nevada County,
California. Under the first agreement MEICO agreed to lease ten
unpatented mining claims, consisting of about 200 acres of the
Liberty Hill Mine, for thirty years. Under the second agreement,
MEICO acquired an option to lease 109 other unpatented mining claims,
consisting of approximately 1,750 acres of the Liberty Hill Mine, for
a nominal option price. Big Trees Trust is controlled by Ray Naylor,
who for many years was an officer of the Company's Century 21 mining
subsidiary.
Under the terms of the lease agreement, MEICO agreed to lease the
subject mining property for thirty years, with an option to terminate
the lease without penalty. MEICO agreed to pay the out-of-pocket costs
of operating the mine. In addition to these out-of-pocket expenses
MEICO agreed to pay Big Trees Trust a nonrefundable advance against
royalties of $40,000 per month (or 15% of the ores mined and sold,
whichever is greater). As of June 30, 1998 MEICO had expended a total
of $2,108,084 in out-of-pocket expenses to bring the mine into operation.
In addition, to these expenses, MEICO has paid Big Trees Trust a total
of $955,000 in advance royalties. Capital expenditures on the mine
amounted to $433,399. Thus total expenditures of all kinds through
June 30, 1998 were $3,496,483. An additional $33,800 was spent on
Century 21 mining equipment used at the Liberty Hill Mine.
Development of the Liberty Hill Project began in the winter of 1996.
MEICO contracted with Ray Naylor to be the operator of the mine and
to develop the project. Beginning in the summer of 1996, Ray Naylor
assured MEICO that the mine was on the verge of production. However,
for one reason or another, including inclement weather, inadequate
water purification equipment, unanticipated clay content of the ore,
etc., Mr. Naylor never actually brought the mine into operation.
Therefore, in the fall of 1997 MEICO began to suspect that Mr.
Naylor was unable or unwilling to bring the mine into production.
On March 5, 1998 TVCN and MEICO sued, inter alia, Big Trees Trust
and Ray Naylor in a dispute over the lease and operation of the
Liberty Hill Mine. In its complaint MEICO alleges that it was
fraudulently induced to enter into the mining lease and that Ray
Naylor breached his contract to operate the mine on MEICO's behalf
in a good and miner-like fashion. MEICO and TVCN claim damages in
excess of $3.5 million. While no answer has been filed in the case,
Mr. Naylor has informed MEICO that he believes it is in default under
the lease and has served a notice of termination of the lease on the
Company. On May 20, 1998 the Court entered an order on the parties'
stipulated motion submitting the matter to binding arbitration. The
parties have agreed to the appointment of Mr. Murray Richtel of the
Judicial Arbiter Group, Inc. as the arbitrator in this matter, and an
arbitration hearing has been set for September 10, 1998. The
arbitration proceeding is in its initial stages, and discovery is
proceeding. At this preliminary stage it is not possible
to predict with any certainty the probable outcome of this matter.
However, TVCN intends to prosecute its claims vigorously.
Century 21/Mountain House Mine
The Company acquired a controlling interest in Century 21 Mining,
Inc. in December 1989. Century 21's principal asset is the
Mountain House Mine. The mine is not yet in operation. The status
of this mine has not changed since the last fiscal year. For more
information, see the company's previous annual reports, which are
incorporated herein by reference.
Reema International Corp.
Reema International Corp. (" Reema") is a wholly-owned subsidiary
of TVCN incorporated to explore for and develop business
opportunities in the oil and gas industry. Specifically, Reema is
in the business of developing projects designed to convert natural
gas into transportation fuels ("Gas Conversion Project"). For more
information, see the company's previous annual reports, which are
incorporated herein by reference.
Internet Business Opportunities
On February 16, 1996 the Company incorporated its wholly-owned
subsidiary, Planet Internet Corp. as an Internet Service Provider
("ISP"). Planet Internet provides internet service to subscribers.
During the first year of testing and operation Planet Internet
concentrated its efforts on local individual accounts. Recently,
Planet Internet has begun concentrating on commercial accounts and
expanding its services nationwide.
Individual dial-up subscribers are charged an average of $19.95 per
month per subscriber with a certain discount for a paid-up yearly
subscription. Planet Internet offers a wide range of services to
commercial accounts for as little as $50.00 per month for dial-up
subscribers to as high as $350.00 per month per subscriber for
accounts with high speed digital modems and other internet
services. As of June 30, 1998, Planet Internet had 785 subscribers.
As of June 30, 1998, Planet Internet has purchased internet
equipment worth $590,476, and has spent $1,152,124 for the
development of its internet services.
Middle East Investment Authorization
At a special meeting of the Company's board of directors held on
December 13, 1995, Omar Duwaik was authorized to explore investment
opportunities in the Middle East. Mr. Duwaik was authorized to
enter into such agreements as were necessary and to invest in a
holding company on behalf of the Company if he deemed such an
investment to be in the best interests of the Company. To date Mr.
Duwaik has explored numerous investment opportunities. However,
none have met the criteria he has established for making such an
investment. Therefore, although Mr. Duwaik was authorized to
commit up to $3 million, no funds have been expended to date
pursuant to the boards authorization. Pursuant to its general
policy of seeking shareholder approval of major investments, the
Company will seek shareholder approval of any investment made
pursuant to this authority.
Qatari WCTV Station
In 1992 the Company received a contract from Qatari Government
Telecommunications Corporation ("Q-Tel") to build a WCTV station in
Doha, Qatar and train operations personnel. The Company built the
station in 1993, and a provisional acceptance certificate for the
station was issued on August 14, 1993. Through May 1996 TVCN
personnel assisted in the management and operation of the station
and trained Qatari personnel. TVCN has guaranteed the supply of
all compatible equipment and spare parts that may be needed for the
maintenance, and refurbishment of the equipment, and the
continuation of the WCTV operation without interruption over a
period of 10 years. The Qatari Wireless cable system was awarded
"Cable Operator of the Year" honors at the CABSAT '95 (cable and
satellite exhibition).
Property, Plant and Equipment
The Company retains ownership of substantially all system equipment
necessary to provide its services to subscribers. Such system
equipment includes all reception and transmission equipment located
at the tower (i.e., the head-end equipment), reception equipment
located at each subscriber location (i.e., subscriber equipment)
and related computers, diagnostic equipment and service vehicles
and facilities. The Salina, Kansas system equipment is valued at
$500,322. The Company's WCTV facilities are, in the opinion of
management, suitable and adequate by industry standards.
The Company owns its executive offices in Denver, Colorado. The
Company also owns a warehouse in Detroit, which is leased to PCTV
at the rate of $4,000 per month until March 1999, and vacant land
in Arapahoe and Jefferson Counties in Colorado, which is being held
for future development. Physical assets of the Company, except for
the mortgage on corporate headquarters and certain capital leases,
are not held subject to any major encumbrance.
<PAGE>
Total Revenues
The total revenue for the first quarter ended June 30, 1998,
was $655,821 as compared to $2,646,173 for the first quarter ended
June 30, 1997. The decrease was due to the sale of the Rome,
Georgia station.
Operating Expenses
Total operating expenses for the first quarter ended June 30, 1998,
are $1,034,829 as compared to $1,275,393 during the first quarter
ended June 30, 1997. The decrease in expenses of $240,565 is
summarized as follows:
Decrease in Salaries and Wages $ (27,354)
Decrease in Programming Fees (13,763)
Increase in Cost of Goods Sold 14,236
Decrease in Mine Development (406,636)
Increase in General & Administrative Expense 145,438
Increase in Depreciation and Amortization 47,260
Increase in Interest Expense 254
NET DECREASE IN TOTAL EXPENSES $ (240,565)
=========
The increase in General and Administrative Expenses is due to
the increased time spent in developing new areas of operations.
The decrease in Mine Development is due to suspension of activity
at the Liberty Hill Mine.
Net Gain
The net loss after income tax estimate for the three months ended
June 30, 1998 was ($382,128), compared to a gain of $894,780 during
the first quarter ended June 30, 1997. The decreased income during
the first quarter ended June 30, 1998, is due to the sale of the
station in Rome, Georgia in June 1997. Operating costs were lower
due to the suspension of mine development.
Income Taxes
See page 8 "Income Tax" note.
Estimated income taxes are calculated at 35% for federal
obligations.
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.
<PAGE>
To date, the Company has not engaged in any debt financing, with
the exception of the BTAs funded through the FCC, and the
purchase of the internet equipment. Instead, it has relied on
individual or group investments. The company's cash flow for the
three months ended June 30, 1998, and June 30, 1997, are summarized
as follows:
June 30, 1998 June 30, 1997
Unaudited Unaudited
Unaudited
Cash Flow From Operating
Activities $ (279,947) $ 843,619
Cash Flow From Investing
Activities (249,053) 1,006,958
Cash Flow From Financing
Activities 307,586 (45,469)
Cash - Beginning of Period 852,362 490,985
---------- -----------
Cash - End of Period $ 630,948 $ 2,296,093
========= ===========
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 and the sale of the Rome, Georgia
station are expected to adequately continue covering the Company's
current liabilities along with allowing the Company develop other
wireless cable TV markets in the United States and explore other
business opportunities domestically and internationally.
Currently, the Company has $2,283,934 in long term debt which is
primarily for the purchase of the TVCN corporate headquarters
building in Denver, Colorado, and for the Basic Trade Area rights
purchased during the FCC BTA Auction.
The Company's current assets and liabilities are $1,759,702
and $1,817,002, 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 $89,607
investments in government securities.
The President, a shareholder, and a Director, have advanced loans
to the Company totaling $ 909,226.
Accounts Receivable and Payable
The decrease in notes receivable as of June 30, 1998, is due
mainly to the receipt of note payment.
Advance from Stockholders
During the period from March 31, 1998 to June 30, 1998, the Company
repaid advances from stockholders totaling $72,864.
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.
On February 14, 1995, Mr. Omar Duwaik was granted a cash bonus of
$100,000 by the Board of Directors. Because of cash flow constraints,
the bonus had not been paid. In lieu of cash, Mr. Duwaik has been
offered 10,000,000 shares of restricted Common Stock of TV
Communications Network, Inc. by the Board of Directors on March 25,
1998. The stock will be issued after approval of the Shareholders.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(A) On March 5, 1998 TVCN and MEICO sued, inter alia, Big Trees
Trust and Ray Naylor in a dispute over the lease and operation of
the Liberty Hill Mine. In its complaint MEICO alleges that it was
fraudulently induced to enter into the mining lease and that Ray
Naylor breached his contract to operate the mine on MEICO's behalf
in a good and miner-like fashion. MEICO and TVCN claim damages in
excess of $3.5 million. While no answer has been filed in the case,
Mr. Naylor has informed MEICO that he believes it is in default under
the lease and has served a notice of termination of the lease on the
Company. On May 20, 1998 the Court entered an order on the parties'
stipulated motion submitting the matter to binding arbitration. The
parties have agreed to the appointment of Mr. Murray Richtel of the
Judicial Arbiter Group, Inc. as the arbitrator in this matter, and an
arbitration hearing has been set for September 10, 1998. The
arbitration proceeding is in its initial stages, and discovery is
proceeding. At this preliminary stage it is not possible
to predict with any certainty the probable outcome of this matter.
However, TVCN intends to prosecute its claims vigorously.
(B) The Company knows of no other litigation pending,
threatened or contemplated, or unsatisfied judgment against it, or
any proceedings in which the Company is a party. The Company knows
of no legal actions pending or threatened or judgments entered
against any officers or directors of the Company in their capacity
as such in connection with any matter involving the Company or the
business.
Item 2. Changes in Securities
None.
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 of Security Holders during
the first quarter of fiscal 1998.
ITEM 5. Other Information
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: August 14, 1998 /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: August 14, 1998
Omar A. Duwaik
PRESIDENT/CEO
Dennis J. Horner
VICE PRESIDENT/TREASURER
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