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 September 30, 1999
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: 50,835,954
shares of the Company's Common Stock ($.0005 par value) were outstanding
as of September 30, 1999.
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND
SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of September 30, 1999
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations for the Three
and Six ending September 30, 1999 (unaudited) . . . . . . . 6
Statements of Cash Flow for the Six
months ending September 30, 1999(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
September 30, 1999
<TABLE>
<CAPTION>
Unaudited Audited
September 30,1999 Mar. 31,1999
________________ _____________
<S> <C> <C>
Current Assets:
Cash $ 266,496 $ 462,157
Investments 27,935 27,200
Accounts Receivable 6,376 28,850
Inventory 165,261 165,261
Current Portion of Notes 1,300 1,300
Current Portion of Def. Tax 121,838 121,838
Other Current Assets 18,076 80,787
______________ _____________
Total Current Assets $ 607,281 $ 887,393
Property and Equipment-Net $ 2,448,999 $ 3,252,830
______________ _____________
Other Assets:
Notes Receivable $ 2,343,878 $ 2,343,500
License Agreements - Net 1,331,804 1,396,945
Deferred income taxes 1,875,442 1,875,443
Other assets 550,088 109,632
Reclamation bonds disc. operations 42,182 42,182
______________ _____________
Sub-total Other Assets $ 8,592,394 $ 5,767,702
Total Assets $ 9,199,676 $ 9,907,925
============== =============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unaudited Audited
Sept. 30,1999 Mar. 31, 1998
_____________ _____________
<S> <C> <C>
Current Liabilities:
Account Payables $ 327,044 $ 469,800
Accounts Payable- discont. Operations 0 23,899
Accrued Expenses 273,295 692,861
Current portion of Long-Term Debt 208,746 367,928
Current maturities of Long Term Discon 37,500 37,500
Current Deferred Gain 0 0
Taxes Payable
Subscribers Deposits 24,316 24,379
_____________ ____________
Total Current Liabilities $ 870,901 $ 1,616,367
Long-term Liabilities:
Long-term Debt $ 1,652,247 $ 1,798,121
Long-term Deferred Gain 2,343,500 2,343,500
Advances from Stockholder 1,173,309 1,100,334
_____________ ____________
Total Long-Term Liabilities $ 5,169,055 $ 5,241,955
Total Liabilities $ 6,039,956 $ 6,858,322
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 25,418
Additional Paid in Capital 7,468,938 7,468,721
Accumulated (Deficit) <4,363,233> <4,473,349>
____________ ___________
Total Stockholders' Equity $ 3,159,720 $ 3,049,603
____________ ___________
Total Liabilities and
Stockholder's Equity $ 9,199,676 $ 9,907,925
============ ===========
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ending September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Sept. 30, 1999 Sept. 30, 1998
________________ ______________
<S> <C> <C>
Revenue-Operations $ 61,610 $ 290,924
Revenue-Sold Cable
Operations $ -0- $ 362,396
Interest Income $ 2,282 $
Total Revenue $ 63,892 $ 653,320
============ ============
Operating Expenses: Profit
Salaries and Wages $ 86,794 $ 235,409
Programming Fees 6,964 11,604
Cost of Goods Sold -0- 24,424
Mine Development -0- 22,316
General and
Administrative 423,336 514,115
Depreciation and
Amortization 76,956 151,601
Interest $ 1,200 $ 68,761
___________ ___________
Total Expenses $ 595,250 $1,028,230
___________ ___________
Operating Income(loss) $ <531,359> $<328,431>
Estimated Income Tax -0- 111,666
___________ ___________
Income After Income Tax <531,359> <216,765>
Gain On Sale of Assets 392,101 -0-
___________ ___________
Income (loss) before <139,257> <216,765>
income tax
Gain from discontinued
operation $ <17,120> $ -0-
___________ ___________
Net Loss <156,377> $ <216,765>
Weighted Average Common
Shares Outstanding 50,835,954
Loss Per Share <.01> <.01>
=========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations
Six Months Ending September 30, 1999 (Unaudited)
<S> <C> <C>
Unaudited Unaudited
6 Months Ending 6 Months Ending
Sept. 30, 1999 Sept. 30, 1998
______________ ______________
Revenue - Operations $ 226,360 $ 591,454
Interest Income 58,420 -0-
Revenue - Sold Cable -0- 717,686
Operations
Revenue - Sold Station -0- -0-
Total Revenue $ 284,780 $ 1,309,140
============== ==============
Operating Expenses: Profit
Salaries and Wages $ 194,176 $ 503,637
Programming Fees 16,635 24,021
Cost of Goods Sold -0- 69,099
Mine Development -0- 48,420
General and Administrative 755,734 940,702
Depreciation and Amortization 218,977 305,564
Interest 60,879 125,136
______________ _____________
Total Expenses 1,246,402 2,016,579
Operating Income (Loss) $ <961,621> $ <707,439>
Estimated Income Taxes $ -0- $ 108,546
______________ _____________
Income After Income Tax $ <961,621> $ <598,893>
Gain on Sale of Assets $ 710,576 $ -0-
______________ _____________
Income Loss Before Income Taxes $ <251,046> $ <707,439>
Gain from discontinued operation <7,978> $ -0-
______________ _____________
Net Loss $ <259,024> $ <598,893>
Weighted Average Common Shares
Ourtstanding 50,835,954
Net Income Per Weighted
Common Share$ $ <.01> $ <.01>
============== =============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
Six Months Ending September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Unaudited Unaudited
6 Months Ending 6 Months Ending
Sept. 30, 1999 Sept. 30, 1998
________________ _______________
Cash Flow From Operating
Activities $ <259,024>
Net Income (loss) $ <598,893>
Adjustment to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and
Amortization 248,491 153,963
Change in certain assets
and liabilities:
Common Stock -0-
(Loss) on Sale of Planet
Internet <466,286>
Gain on Sale of Real
Estate <244,290>
Accounts Receivable 22,474 <18,911>
Taxes Payable -0- <21,850>
Inventory -0- <38,101>
Prepaid Expenses -0-
Accounts Payable <166,655> <119,825>
Accrued Expenses <419,566> 34,490
Subscriber Deposits <61> 140
Deferred Gain -0- <657,992>
Deferred Taxes -0- 191,036
Other Assets <3,000>
______________ _____________
Cash flows used in
operating Activities $ <1,287,917> $<1,075,673>
______________ _____________
Cash Flows From Investing Activities:
Net Investing
Activity $ 302,463 $
Proceeds From Sale
of Real Estate 578,584
Property & Equipment
Purchases 506,457
Investments <3,121>
Property & Equipment <35,432>
Notes Receivable <378> 736,513
Other <62,711> <38,600>
______________ _____________
Cash Flows provided by investing
activities: $ 1,324,415 $ 659,280
______________ _____________
Cash Flows From Financing Activities:
Payments of Stockholder
Advances $ 72,975 $
Long-term Debt <305,057> <11,381>
License Agreements <77> 79,136
______________ _____________
Cash flows used in financing
Activities $ <232,159> $ 118,965
______________ _____________
Net Increase (decrease)
in Cash <195,661> <153,074>
Cash - Beginning
of Year $ 462,157 $ 852,367
______________ _____________
Cash - End of Period $ 266,496 $ 699,283
============== =============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
September 30, 1999 and 1998 (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/A for Fiscal Year
ending March 31, 1999.
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, 1999, and
September 30, 1998, 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 six months ending September 30,
1999, and September 30, 1998, 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 50,835,954, and 41,188,454 common shares
outstanding for 1999 and 1998 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 Company has the
following net operating loss carry forwards:
Net Operating Year of
Loss Carry forward
Expiration
Year ended March 31, 1999 $5,300,000 2014
ITEM 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Wireless Cable Operations
Salina, Kansas. TVCN is currently operating a wireless
cable TV ("WCTV") system in Salina. The system broadcasts on 19
channels to a base of 485 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. The number of subscribers remain limited because of
the limited number of TV channels. With only 19 TV channels,
the Company has been unable to compete effectively against
conventional cable TV operators. Through the agreement with
Heartland Communications, which agreement is awaiting FCC
approval, the Company hopes to increase the number of TV
channels to 33.
Mobile, Alabama. The Company's 4-TV channel station (E1,
E2, E3, E4) in Mobile, Alabama was leased to Mobile Wireless TV,
Inc. ("Mobile Wireless") pursuant to a lease agreement dated May
9,1994. The lease was for an initial period of five years at
the greater of $2,000.00 per month, 0.50 per month per
subscriber or 2.0% of the gross monthly revenues of the station.
Mobile Wireless was hoping to lease many additional TV channels
from other licensees in order to offer a reasonable alternative
to conventional cable TV in Mobile. However, Mobile Wireless
was able to lease only seven more channels in addition to the
Company's four channels. With only 11 TV channels, Mobile was
unable to mount a viable commercial wireless cable TV system
that could compete adequately against cable TV systems. The
revenues of the station remained limited, and the maximum
monthly transmission fees received by the Company was $2,000.00
during the last five years. The lease expired in May, 1999.
Mobile Wireless expressed its interest to renew the lease for
five more years under the same terms and conditions. The
Company declined to enter into a long term lease because of
its desire to sell its rights and interest in the station.
However, the Company agreed to lease the station on a month-to-
month basis at the rate of $1,200.00 per month. The Company is
considering the sale of its assets in this Mobile market.
San Luis Obispo, California. The Company owns a 4-TV
channel station (E1, E2, E3, E4) station in San Luis Obispo,
California which was leased to Wireless Telecommunications, Inc.
("WCTV") in 1995. In January, 1996, WCTV defaulted on its
payment to the Company. The Company repossessed the station in
June 1996 and has been operating it since that time. As part of
the settlement with WTCI, WTCI conveyed all of its assets in 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 for the BTA on May
23, 1997. Subsequently, the Company acquired the three H-Group
channels licensees (H1, H2 and H3) for $20,000.00. The FCC
approved the acquisition. Currently, the Company is
broadcasting on seven channels (3 H-Group channels and 4 E-Group
channels) to 59 subscribers. As the new owner of the BTA, the
Company applied for the 4 F-Group channels (F1, F2, F3 and F4)
and for the two channels MDS1 and MDS2. The FCC approved the
Company's applications for the last six channels. The Company
has not yet constructed the transmission facilities for the six
additional channels. The Company has until August, 2001 to
complete such construction. The Company is considering selling
all of its assets in this SLO market.
Other stations. The Company owns 4-TV channel stations in
each of Hays, Kansas; Woodward, Oklahoma; and Quincy, Illinois.
In cooperation with its affiliate, Multichannel Distribution of
America, Inc. (MDA) the Company has constructed four-channel
station in Myrtle Beach, South Carolina; Rome, Georgia; and
Scottsbluff, Nebraska. MDA is owned and controlled by TVCN's
president. The Quincy station is involved in a three-way
transaction. The Company acquired the station from its
affiliate MDA and entered into an agreement with Heartland
Communications to transfer and assign its rights and interest in
the Quincy station to Heartland in exchange for transferring
certain of Heartland's rights and interest in its BTA in Salina,
Kansas to the Company. The agreement with Heartland is awaiting
a final approval from the FCC. The Woodward station is being
leased to Heartland for $500.00 per month for a period of two
years expiring April 2001. The Company's stations in Myrtle
Beach and Scottsbluff have not been placed in commercial
operations, nor are they the subject of any lease because no
lease has been offered. Because of the limited number of
channels (4 channel each) of these stations, the Company has no
immediate plans to place such two stations in commercial
operations. The Company is considering the sale of these and
other stations.
FCC Auction
As a result of the FCC Auction in 1996, the Company was the
successful bidder on the following BTAs: Clarksburg-Elkins,
Fairmount, Logan, Morgantown, Wheeling, West Virginia;
Steubenville, Ohio/Weirton, West Virginia; Dickinson and
Williston, North Dakota; Scranton/Wilkes Barre/Hazleton and
Stroudsburg, Pennsylvania; Scottsbluff, Nebraska; and Watertown,
New York. The Company's net bid was $1,276,000 (taking into
account the 15% small business credit TVCN received). As of
June 30, 1999, the total amount outstanding on this obligation
is 974,557, which the Company is financing over ten years as
reflected in the company's financial statements. Prior to the
Auction, the FCC used to grant stations licenses through a
lottery process. The Company has not yet finalized its plans
with respect to development of WCTV stations in these BTAs, and
there is no assurance that the Company will have sufficient
resources to develop such stations. The Company is considering
the sale of all of its rights and interest in these BTAs.
In connection with its BTA in Scranton, PA, the Company has
applied to the FCC for five vacant channels. Four of the
applications were approved and four licenses were issued to the
Company. The fifth application is still pending at the FCC. In
order to aggregate more channels, which is essential for the
success of any WCTV system, the Company purchased, for $195,705,
ATI's rights and interest in a lease agreement that ATI had with
the licensee of the F-Group license in Scranton, PA. Further,
The Company has been discussing with an entity in Scranton, PA
the possibility of purchasing its rights and interest in lease
agreements concerning 24 more TV channels in Scranton.
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.
All payments under the original Detroit Note have been received.
Pursuant to the Additional Detroit Note, as of June 30, 1999 the
balance of $2,448,957.50 is due to the Company by December 30,
2000.
Denver, Colorado
In December, 1993, the Company sold its Denver, Colorado
WCTV Station to American Telecasting, Inc. (ATI) of Colorado
Springs, Co. The gross purchase price was about $6.1 million
payable over a period of five years. All payments have been
received and no further payments are due.
Mining Business
The Company invested in two mines, but neither was ever
brought into commercial operations. After considerable losses,
the Company has decided not to make any further mining
investment, and to discontinue the mining operations. The
following is a summary of the mining operations:
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. On May 20,
1998 the Court entered an order on the parties' stipulated
motion submitting the matter to binding arbitration. The
parties agreed to the appointment of Mr. Murray Richtel of the
Judicial Arbiter Group, Inc. as the arbitrator in this matter,
and an arbitration hearing was set for September 10, 1998.
However, on September 1, 1998, the parties entered into a
preliminary agreement to settle their dispute by selling the
mine and splitting the proceeds. Subsequently, Naylor attempted
to disavow this settlement agreement. The Company filed a
second law suit to enforce the settlement agreement. The case
is still pending. 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 in operation. The
Company held this mine without development for investment
purposes. The decision as to whether commercial or not to
commercially develop that mine was contingent upon the success
of the mining operation of the Liberty Hill Mine. Since the
development of the latter was not successful, the Company
decided to sell its interest in this Century 21 mine. If the
sale is successful, the Company does not expect such sale to
have any material effect on the Company's financial statements.
Reema International Corp.
Reema International Corp. (Reema) is a wholly-owned
subsidiary of TVCN. It was 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, or
Gas To Liquid ("GTL"). For more information, see the Company's
1999 Annual Report, as amended, on Form 10-KSB/A for the period
ended March 31, 1999.
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 provided internet service to
subscribers. By March 31, 1999, Planet had 836 subscribers. On
May 18, 1999, the Company signed on agreement to sell Planet to
BeWell Net Corp., another ISP. The net sale price was
$1,508,640 payable in common stock of BeWell Net at the rate of
$5.00 per share. Accordingly, the Company received 301,728
shares of the common stock of BeWell Net. As part of the sale,
the Company has allocated 80,000 shares for distribution to
various employees as performance bonuses. None of the officers
or directors of the Company received any of said stock other
than Kenneth Roznoy who received 5,000 shares of said stock.
BeWell Net is a private company and has no public trading market
for its stock. The Company continued to assume certain debt
responsibility of Planet in the amount of $53,515.
InterOmni Services - The InterOmni Wallet
TVCN has incorporated a wholly-owned subsidiary, InterOmni
Services, Inc, in order to develop the InterOmni Wallet, a
digital profile that tracks and records information about
individuals. The Company attempted to sell InterOmni, but the
sale did not go through. The Company has ceased any further
development in InterOmni.
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 thought
of for making such an investment. No specific criteria has been
established, other than reasonable degree of risk and rate of
return as determined by Duwaik on a project by-project basis.
Although Mr. Duwaik was authorized to commit up to $3 million,
no funds have been expended to date, and no plan to expend any
funds. Pursuant to its general policy of seeking shareholder
approval of major investments, the Company will seek shareholder
approval of any material 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 was leased to
PCTV at the rate of $4,000 per month until March 1999, and
vacant lands in Arapahoe and Jefferson Counties in Colorado,
which are 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. The Company has
recently sold one of its two residential lots, and has signed an
agreement to sell its office building in Denver, and its
warehouse in Detroit.
Total Revenues
The total revenues for the three and six months periods
ending September 30, 1999 were $63,892 and $284,780
respectively, as compared to $653,832 and $1,309,140 for the
same periods ending September 30, 1998. The decrease was due to
the sale of Planet Internet.
Operating Expenses
Total operating expenses for the three and six months
periods ending September 30, 1999, are $595,250 and $1,246,402,
respectively as compared to $1,028,230 and 2,016,579 during the same
periods ending September 30, 1998. The three-month change in expenses
of $432,980 is summarized as follows:
Decrease in Salaries and Wages $ <148,615>
Decrease in Programming Fees <4,640>
Decrease in Cost of Goods Sold <24,424>
Decrease in Mine Development <22,316>
Decrease in General & Administrative Expense <90,779>
Decrease in Depreciation and Amortization <74,645>
Decrease in Interest Expense <67,561>
NET DECREASE IN TOTAL EXPENSES $ <432,980>
All decreases were the result of reduction and streamlining
of operations, and the sale of Planet Internet.
Net Gain
The net gain <loss> after income tax estimate for the three
and six month periods ending September 30, 1999 were $<531,359>
and $<961,621>, compared to a loss of $<328,431> and $<589,893>
during the six months ended September 30, 1998. The loss increase
was due to the sale of Planet Internet. Again, operating costs
were lower due to such sale.
Income Taxes
Estimated income taxes are calculated at 35% for federal
obligations.
Liquidity and Capital Resources
The Company initially financed its growth through private loans
and private sale of stock. The Company will finance its future growth
primarily from the sale of assets.
To date, the Company has not engaged in any debt financing,
with the exception of the BTA's funded through the FCC. The debt
that resulted from the purchase of the internet equipment has been
transferred to and assumed by the buyer of Planet Internet. The
Company has relied on private individuals or group investments. The
Company's cash flow for the six months ended September 30, 1999, and
September 30, 1998, are summarized as follows:
Sept 30, 1999 Sept 30, 1998
Unaudited Unaudited
Cash Flow From Operating
Activities $ <1,287,917> $ <1,075,943>
Cash Flow From Investing
Activities $ 1,324,415 $ 659,280
Cash Flow From Financing
Activities $ <232,159> $ 118,965
Cash - Beginning of
Period $ 462,157 $ 852,367
Cash - End of Period $ 266,496 $ 699,283
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, the sale of the Rome, Georgia
station, and the sale of other assets are expected to adequately
continue covering 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 $1,652,247 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 has signed agreements to sell
its office building in Denver, Colorado, and to sell its
warehouse facility in Detroit, Michigan. For more information,
see the Company's Annual Report on Form 10-KSB/A for the period
ended March 31, 1999.
The Company's current assets and liabilities are $607,281
and $870,901, 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 $90,780
investments in government securities.
Accounts Receivable and Payable
The decrease in notes receivable as of September 30, 1998,
is due to the receipt of note payments.
Advance from Stockholders
The President of the Company continued to advance loans to
the Company, as of September 30, 1999, these loans totaled
$1,071,600.
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 has not been paid.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Except as noted under the heading Frederick Case
Settlement, and Mining and Energy International, as detailed
in the Company's Annual Report on Form 10-KSB/A for the period
ended March 31, 1999, 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
There were no changes in Securities during the second
quarter ending September 30, 1999.
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 September 30, 1999.
ITEM 5. 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: November 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: November 15, 1999
/ss/KENNETH D. ROZNOY
Kenneth D. Roznoy
Vice President
