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 ending December 31, 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:
51,195,914 shares of the Company's Common Stock ($.0005 par value)
were outstanding as of December 31, 1998.
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of December 31, 1998
(unaudited) . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations for the Three and
Nine months ending December 31, 1998 (unaudited). . . 6
Statements of Cash Flow for the Nine
months ending December 31, 1998(unaudited) . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
Unaudited Audited
Dec. 31,1998 Mar. 31,1998
_____________ ____________
<S> <C> <C>
Current Assets:
Cash $ 691,893 $ 852,362
Investments 91,883 87,659
Accounts Receivable 52,888 39,498
Inventory 145,129 107,028
Current Portion of Notes 1,300 737,813
Current Portion of Def. Tax 151,188 151,188
Other Current Assets 0 96,071
Total Current Assets $ 1,134,281 $ 2,071,619
____________ ____________
Property and Equipment-Net $ 3,397,113 $ 3,579,109
____________ ____________
Other Assets:
Notes Receivable $ 2,343,500 $ 2,343,500
License Agreements - Net 1,861,017 1,598,800
Other Assets 1,467,143 1,419,439
____________ ____________
Total Other Assets $ 5,671,660 $ 5,361,739
____________ ____________
Total Assets $10,203,054 $11,012,467
============ ============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unaudited Audited
Dec. 31,1998 Mar. 31, 1998
_____________ ____________
<S> <C> <C>
Current Liabilities:
Account Payable $ 313,487 $ 322,865
Accrued Expenses 726,825 630,250
Current portion of Long-Term Debt 170,439 235,195
Current Deferred Gain -0- 657,992
Taxes Payable -0- 21,850
Subscribers Deposits 24,830 24,630
___________ ___________
Total Current Liabilities $ 1,235,581 $ 1,892,782
Long-term Liabilities:
Long-term Debt $ 2,075,047 $ 1,938,483
Long-term Deferred Gain 2,343,500 2,343,500
Advances from Stockholder 886,250 904,304
___________ ___________
Total Long-Term Liabilities $ 5,304,797 $ 7,079,069
Stockholders' 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; no shares outstanding -0- -0-
Class D preferred stock, $1 par
Value; shares outstanding -0- -0-
Common Stock, $.0005 par value;
100,000,000 shares authorized;
51,195,914 outstanding 25,201 20,197
Additional Paid in Capital 7,777,259 7,281,889
Accumulated (Deficit) <4,168,597> <3,397,501>
____________ ___________
Total Stockholders's Equity $ 3,662,676 $ 3,933,398
____________ ___________
Total Liabilities and Stockholder's
Equity $10,203,054 $11,012,467
============ ============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ending December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Dec. 31, 1998 Dec. 31, 1997
________________ ______________
<S> <C> <C>
Revenue - Operations $ 238,230 $ 397,158
Revenue - Sold Cable
Operations 0 451,392
Revenue Lawsuit Settlement 300,000 0
Total Revenue 538,230 848,550
=========== ===========
Operating Expenses: Profit
Salaries and Wages $ 251,550 $ 297,587
Programming Fees <5,039> 21,528
Cost of Goods Sold 11,143 40,944
Mine Development 16,714 150,941
General and Administrative 298,684 297,967
Depreciation and Amortization 161,632 156,925
Interest $ 64,460 $ 92,437
____________ ___________
Total Expenses $ 799,144 $ 1,058,329
Income Before Income Taxes $ <260,914> $ <209,779>
____________ ___________
Estimated Income Taxes $ < 88,711> $ <72,793>
____________ ___________
Income After Income Tax <172,203> <136,986>
____________ ___________
Net Income Per Common Share $ <.004> $ <.004>
____________ ___________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Nine Months Ending December 31, 1998 (Unaudited)
<S> <C> <C>
Unaudited Unaudited
9 Months Ending 9 Months Ending
Dec. 31, 1998 Dec. 31, 1997
________________ _______________
Revenue - Operations $ 829,685 $ 975,971
Revenue - Sold Cable 717,686 1,004,525
Operations
Revenue - Sold Station -0- 2,000,000
Revenue Lawsuit Settlement 300,000 0
Total Revenue $1,847,371 $ 3,980,496
============ ============
Operating Expenses: Profit
Salaries and Wages $ 755,187 $ 902,001
Programming Fees 18,982 67,873
Cost of Goods Sold 80,242 86,460
Mine Development 65,133 1,143,194
General and Administrative 1,239,389 1,027,084
Depreciation and Amortization 467,196 389,108
Interest 189,595 217,123
___________ __________
Total Expenses $2,815,724 $3,832,843
___________ __________
Income Before Income Taxes $ <968,353> $ 147,652
___________ __________
Estimated Income Taxes $ <197,257> $ 51,575
___________ __________
Income After Income Tax $ <771,096> $ 96,077
___________ __________
Net Income Per Weighted Common Share $ <.01> $ .002
=========== ==========
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
Nine Months Ending December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Unaudited Unaudited
9 Months Ending 9 Months Ending
Dec. 31, 1998 Dec. 31, 1997
______________ ______________
Cash Flow From Operating Activities
Net Income (loss) $ <771,096> $ 96,077
Adjustment to reconcile net income
(loss) to net cash used in operating
activities
Depreciation and Amortization 467,197 389,107
Change in certain assets and liabilities
Common Stock 500,373 0
Accounts Receivable <13,390> <43,600>
Taxes Payable <21,850> 144,511
Inventory <38,101> -0-
Prepaid Expenses 0 <52,383>
Accounts Payable <9,378> <122,873>
Accrued Expenses 96,575 <108,879>
Subscriber Deposits 200 <390>
Deferred Gain <657,992> <469,486>
Deferred Taxes 105,440 0
___________ _________
Cash flows used in operating Activities $ <342,022> $<167,915>
___________ __________
Cash Flows From Investing Activities:
Investments $ <4,224> $1,504,172
Property & Equipment <99,824> <647,891>
Notes Receivable 736,513 1,382,523
Other <57,078> <9,292>
__________ __________
Cash Flows provided by investing
activities: $ 575,387 $ 2,229,512
___________ ___________
Cash Flows From Financing Activities:
Payments of Stockholder Advances $ <18,053> $ <145,993>
Long-term Debt 71,808 587,975
License Agreements <447,594> <547,838>
_________ __________
Cash flows used in financing
Activities $<393,839> $ <105,856>
_________ _________
Net Increase (decrease) In Cash <160,464> 1,955,741
Cash - Beginning of Year $ 852,367 $ 490,985
__________ __________
Cash - End of Period $ 691,893 $2,446,726
=========== ===========
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 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 June 29, 1998 for Fiscal Year
ending 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 December 31, 1998, and December
31, 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 and nine
months ending December 31, 1998, and December 31, 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 42,300,394, and 41,188,454 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 Year of
Loss Carry forward Expiration
Year ended March 31, 1993 $2,950,000 2009
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 520 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 a cash payment of $100,000, and a promissory note
in the amount of $100,000. The note was paid on May 22, 1997. 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 other four licenses are those of Salina
and Hays, Kansas; San Luis Obispo, California; and Mobile Alabama.
The Company temporarily 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 repossessed the San
Luis Obispo, California WCTV station from Wireless Telecommunica-
tions, Inc. (WTCI) in 1996 and has been operating it since that
time. As part of a settlement with WTCI, WTCI conveyed all of its
assets in the San Luis Obispo station to the Company, and the
Company agreed to purchase the San Luis Obispo Basic Trading Area
(BTA) from WTCI. The purchase price for the BTA was $452,168.
Of this amount $90,000 was paid in cash, and $362,168 was paid in
the form of the Company's assumption of an obligation in that
amount payable to the FCC over 10 years, with interest only
payments for the first two years and principal and interest
payments for the final eight years. The FCC approved the transfer
of the BTA on May 23, 1997, and the Company is in the process of
applying for 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 has received FCC approval of the
transfer of these channels. Currently, the Company is broadcasting
on seven channels to 20 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 received the licenses from the FCC for five channels in the
Scranton/Wilkes-Barre/Hazelton BTA.
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 ECNM's 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 December 31, 1998
the total outstanding deferred purchase price of the Detroit
station was paid in full.
Mining Business
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 September 30, 1998 MEICO had expended a
total of $2,130,400 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 September 30, 1998 were $3,518,799. 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. In September 1998 the parties agreed to all material terms
of a settlement of the dispute. However, Mr. Naylor subsequently
repudiated the settleemnt. The Company has Notified Mr. Naylor that
it intends to take whatever steps are necessary to enforce the
Settlement Agreement.
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 December 31, 1998, Planet Internet had
approximately 800 subscribers.
As of September 30, 1998, Planet Internet has purchased
internet equipment worth $548,728, and has spent $466,485 for the
development of its internet services.
InterOmni Services - The InterOmni Wallet
TVCN has incorporated a new, wholly-owned subsidiary, InterOmni Services,
Inc, (IOSI), in order to develop the InterOmni ("IO") Wallet, a digital profile
that tracks and records information about an individual. The IO Wallet will
develop a consumer profile based on the individual's demographics, purchasing
behavior, and interests and hobbies. Data from the IO Wallet can then be sold
to advertisers, marketers, and merchants.
The IO Wallet will work by allowing individuals to sell specific data to
merchants at the point of transaction (i.e. visiting a web site or making an
online purchase). IOSI will also act as a traditional list broker. For example,
an advertiser can send advertisement to IOSI clients. This could be a direct
marketing piece, an email, or even a broadcast TV commercial if and when
broadcast and cable TV are integrated with the Internet. IOSO will generate a
commission based upon the value of the data.
According to "The Economist," total advertising spending in the US exceeded
$250 billion in 1997. It was reported that in 1998, $163 billion was spent on
direct marketing which is expected to increase by 7% a year versus 5.5% growth
for total advertising spending. Internet advertising for the first nine months
of 1998 was $1.3 billion and is expected to increase to $15 billion by 2003
according to Forrester Research (a 54% compounded annual growth rate).
The IO Wallet is under development. A beta version of the product if
successful may become available by the end of 1999. Therefore, Management does
not expect any revenues from the InterOmni Wallet anytime soon. There is
no assurance with any degree of certainty that the development of the IO Wallet
will be successful. More information about the InterOmni Wallet can be found at
http://www.InterOmni.com
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 board's 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 $542,499. 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, are not held
subject to any major encumbrance.
Total Revenues
The total revenue for the three and nine months periods ending
December 31, 1998, was $538,230 and $1,847,371 respectively, as
compared to $848,550 and $3,980,496 for the same periods ending
December 31, 1997. The previous increase was due to the sale of the Rome,
Georgia station in 1997.
Operating Expenses
Total operating expenses for the three and nine months periods
ending December 31, 1998, are $799,144 and $2,815,724 as compared
to $1,058,329 and $3,832,843 during the same period ending
December 31, 1997. The change in expenses of $1,017,119 is summarized
as follows:
Decrease in Salaries and Wages $ <146,814>
Decrease in Programming Fees <48,891>
Decrease in Cost of Goods Sold <6,218>
Decrease in Mine Development <1,078,061>
Increase in General & Administrative Expense 212,305
Increase in Depreciation and Amortization 78,088
Decrease in Interest Expense <27,528>
NET INCREASE IN TOTAL EXPENSES $<1,017,119>
The decrease in salaries is a result of streamlining staff
requirements. The increase in cost of Goods Sold, General and
Administrative Expenses is due to the increased efforts to increase
Operating Revenues. The decrease in Mine Development expenses is
due to the suspension of activity in developing the Liberty Hill Mine.
Net Gain
The net gain <loss> after income tax estimate for the three
and nine month periods ending December 31, 1998 was $<172,203> and
$<771,096>, compared to a change of $<136,986> and $96,077 during
the three and nine months ending December 31, 1997. The decreased income
during the first nine months ended December 31, 1998, is due to the
lack of selling any stations in 1998, as compared 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 TV Stations, TV licenses and/or other assets.
To date, the Company has not engaged in any debt financing,
with the exception of the BTA's 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
nine months ended December 31, 1998, and December 31, 1997, are
summarized as follows:
Dec. 31, 1998 Dec. 31, 1997
Unaudited Unaudited
Cash Flow From Operating
Activities $ <342,022> $ <167,915>
Cash Flow From Investing
Activities $ 575,387 $2,229,512
Cash Flow From Financing
Activities $ <393,839> $ <105,856>
Cash - Beginning of Period $ 852,367 $ 490,985
Cash - End of Period $ 691,893 $2,446,726
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 $2,245,486 in long term debt which
is primarily for the purchase of the TVCN corporate headquarters
building in Denver, Colorado, for the Basic Trade Area rights
purchased during the FCC BTA Auction, and for Equipment Purchases.
The Company's current assets and liabilities are $1,134,281
and $1,235,581, 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 $91,883
investments in government securities.
The President, a shareholder, and a Director, have advanced
loans to the Company totaling $886,250.
Accounts Receivable and Payable
The decrease in notes receivable as of December 31, 1998,
is due to the receipt of note payments.
Advance from Stockholders
During the period from March 31, 1998 to December 31, 1998,
the Company repaid advances from stockholders totaling $18,053.
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.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company knows of no material 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 material 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
On November 20, 1998, 8,507,460 Shares of Restricted Common Stock were
issued to Omar A. Duwaik in exchange for all of the outstanding shares of MDA
of Illinois, Inc. The primary asset is the E-Group Licenses in Quincy, IL,
which will be used in acquiring the Salina, Kansas BTA from Heartland Wireless,
Inc.
On November 20, 1998 1,500,000 Shares of Restricted Common Stock were
issued to Omar A. Duwaik in exchange for 60% of the partnership owning the
South 41 Auto Salvage in Calhoun, GA, which is now a wholly owned subsidiary
of the Company.
Both transactions were approved by Shareholders, as reported in the 10Q
dated 9/30/98.
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 Shareholders during the quarter
ended December 31, 1998.
ITEM 5. Other Information
Dennis J. Horner has resigned as Vice President of Finance, Secretary and
Director from TV Communications Network, Inc. effective February 9, 1999. Mr.
Horner had no disagreements with Management.
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 15, 1999
/ss/Omar A. Duwaik
Omar A. Duwaik
PRESIDENT/CEO
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 15, 1999
Omar A. Duwaik
PRESIDENT/CEO
