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 June 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:
51,195,914 shares of the Company's Common Stock ($.0005 par value)
were outstanding as of June 30, 1999.
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30, 1999
(unaudited) . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Operations for the Three
ending June 30, 1999 (unaudited). . . 6
Statements of Cash Flow for the Three
months ending June 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
June 30, 1999
<TABLE>
<CAPTION>
Unaudited Audited
Jun. 30,1999 Mar. 31,1999
_____________ ____________
<S> <C> <C>
Current Assets:
Cash $ 649,701 $ 462,157
Investments 165,105 27,200
Accounts Receivable 6,449 28,850
Inventory 165,261 165,261
Current Portion of Notes 0 1,300
Current Portion of Def. Tax 121,838 121,838
Other Current Assets 6,522 80,787
____________ ___________
Total Current Assets $ 1,114,876 $ 887,393
Property and Equipment-Net $ 2,534,384 $ 3,252,830
____________ ____________
Other Assets:
Notes Receivable $ 2,345,178 $ 2,343,500
License Agreements - Net 1,331,879 1,396,945
Deferred income taxes 1,923,928 1,875,443
Other assets 106,632 109,632
Reclamation bonds disc. operations 42,182 42,182
____________ ____________
Sub-total Other Assets $ 5,749,799 $ 5,767,702
Total Other Assets $ 8,284,183 $ 9,020,532
____________ ____________
Total Assets $ 9,399,059 $ 9,907,925
============ ============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unaudited Audited
Jun. 30,1999 Mar. 31, 1999
_____________ ____________
<S> <C> <C>
Current Liabilities:
Account Payable $ 384,547 $ 469,800
Accounts Payable-discont. operations 22,158 23,899
Accrued Expenses 120,228 692,861
Current portion of Long-Term Debt 367,928 367,928
Current maturities of Long Term Discon. 37,500 37,500
Current Deferred Gain -0- 0
Taxes Payable -0-
Subscribers Deposits 24,110 24,379
___________ ___________
Total Current Liabilities $ 956,471 $ 1,616,367
Long-term Liabilities:
Long-term Debt $ 1,677,928 $ 1,798,121
Long-term Deferred Gain 2,343,500 2,343,500
Advances from Stockholder 1,087,390 1,100,334
___________ ___________
Total Long-Term Liabilities $ 5,108,818 $ 5,241,955
Total Liabilities $ 6,065,289 $ 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) <4,189,182> <4,473,349>
____________ ___________
Total Stockholders' Equity $ 3,333,770 $ 3,049,603
____________ ___________
Total Liabilities and Stockholder's
Equity $ 9,399,059 $ 9,907,925
============ ============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ending June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Jun. 30, 1999 Jun. 30, 1998
________________ ______________
<S> <C> <C>
Revenue-Operations $ 164,786 $ 300,531
Revenue-Sold Cable Operations 0 355,290
Interest Income 56,139
Total Revenue $ 220,925 $ 655,821
============ ============
Operating Expenses: Profit
Salaries and Wages $ 107,382 $ 268,228
Programming Fees $ 9,671 12,418
Cost of Goods Sold 0 44,675
Mine Development 0 26,104
General and Administrative 269,065 473,065
Depreciation and Amortization 142,021 153,964
Interest 59,679 56,375
___________ ___________
Total Expenses $ 587,818 $1,034,829
___________ ___________
Operating Income(Loss) $ <366,893> $ <379,008>
Estimated Income Taxes $ 0 $ 3,120
___________ ____________
Income After Income Tax $ <366,893> $ <382,128>
Gain on Sale of Real Estate $ 224,290 $ 0
___________ ____________
Income (loss) before income taxes $ <142,603> $ <379,008>
Income Tax Expense - Deferred $ 48,485 $ 129,924
___________ ___________
Net (loss) Income from continuing Oper. $ <94,118> $ <252,204>
Gain from Discontinued operations net 9,142 0
of tax benefit
___________ __________
Net Loss $ <84,976> $ <252,204>
Weighted Average Common Shares Outstanding 50,835,954
Loss per Share <0.002> <.01>
=========== ==========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
Three Months Ending June 30, 1999 (Unaudited)
<S> <C> <C>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Jun. 30, 1999 Jun. 30, 1998
______________ ______________
Cash Flow From Operating Activities
Net Income (loss) $ <180,070> $ <382,128>
Adjustment to reconcile net income
(loss) to net cash used in operating
activities
Depreciation and Amortization 142,021 153,963
Change in certain assets and liabilities
Common Stock 0 0
Accounts Receivable 22,401 <7,188>
Taxes Payable 0 <21,850>
Inventory 0 <37,180>
Prepaid Expenses 0 0
Accounts Payable <40,385> 42,565
Accrued Expenses <44,308> <27,954>
Subscriber Deposits <269> <175>
Deferred Gain 0 0
Deferred Taxes 0 0
Other Assets 66,388 0
____________ ___________
Cash flows used in operating Activities $ < 34,222> $<279,947>
Cash Flows From Investing Activities:
Investments $ <735> $ <1.948>
Property & Equipment 230,833 <151,905>
Notes Receivable 1,300 192,409
Other 74,265 <95,202>
___________ __________
Cash Flows provided by investing
activities: $ 305,663 $ <56,644>
___________ ___________
Cash Flows From Financing Activities:
Payments of Stockholder Advances $ <12,944> $ 4,922
Long-term Debt <70,953> 110,255
License Agreements 0
_________ __________
Cash flows used in financing
Activities $ <83,897> $ 115,177
_________ _________
Net Increase (decrease) In Cash 187,544 <221,414>
Cash - Beginning of Year $ 462,157 $ 852,362
__________ __________
Cash - End of Period $ 649,701 $ 630,948
=========== ===========
Supplemental Information:
The sale of 100% of the stock of TVCN's wholly-owned subsidiary, Planet
Internet, has been recorded as an exchange for certain number of shares of
BeWell Net's stock.
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
June 30, 1998 and 1999 (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, as amended, 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 June 30, 1999, and June 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 months
ending June 30, 1999, and June 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
abligation 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 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 is 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 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. 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
During the period ended June 30, 1999, the Company sold one
of its two residential lots for $630,000 that generated a real
estate gain of $224,290. The net operating loss for the quarter
ended June 30, 1999 was $366,893 as compared to $379,008 for the
quarter a year ago. The loss is reduced to $142,603 for the
June, 1999 quarter when the real estate sale is taken into account.
The total revenue for the first quarter ended June 30, 1999,
was $220,925 as compared to $655,821 for the first quarter ended
June 30, 1998. The decrease was due to the sale of the Company's
Subsidiary, Planet Internet, and the fact that no TV station was
sold during the current period.
Operating Expenses
Total operating expenses for the first quarter ended
June 30, 1999, are $587,818 as compared to $1,034,029 during
the first quarter ended Jun 30, 1998. The decrease in
expenses of $446,811 is summarized as follows:
Decrease in Salaries and Wages $ <160,846>
Decrease in Programming Fees <2,747>
Decrease in Cost of Goods Sold <44,675>
Decrease in Mine Development <26,104>
Decrease in General & Administrative Expense <204,000>
Decrease in Depreciation and Amortization <11,943>
Increase in Interest Expense 3,504
NET DECREASE IN TOTAL EXPENSES $<446,811>
The decrease in salaries and wages, and General and Administrative
Expenses is due to the reduction in personnel, and other general
expenses, and the sale of Planet Internet. The decrease in Mine
Development is due to the discontinuation of activity at the
Liberty Hill Mine.
Net Gain
The Company realized a net gain of $224,290 from the sale of its
real estate property.
Liquidity and Capital Resources
The Company initially financed its growth through private loans and
private financing.
The Company will finance its future growth
primarily from the sale of assets and possibly through
further private financing, of which there can be no assurance
of success.
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. The Company's cash flow for
the three months ended June 30, 1999, and June 30, 1998, are
summarized as follows:
June 30, 1998 June 30, 1999
Unaudited Unaudited
Cash Flow From Operating
Activities $ <279,947> $ <34,222>
Cash Flow From Investing
Activities $ <56,644> $ 305,663
Cash Flow From Financing
Activities $ 115,177 $ <83,897>
Cash - Beginning of Period $ 852,362 $ 462,157
Cash - End of Period $ 630,948 $ 649,701
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 develop other wireless cable TV markets in
the United States and explore other business opportunities
domestically and internationally.
Currently, the Company has $2,125,293 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 $1,114,876
and $956,471, 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 investments
of $165,105 in government securities.
Accounts Receivable and Payable
The increase in assets and decrease in liabilities were
the result of the sale of the Company's real estate and Planet
Internet.
Advance from Stockholders
The president of the Company continued to advance loans to
the Company. As of June 30, 1999, these loans totaled
$1,087,390.
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
In connection with its past investment in mining operations, the Company
filed a law suit against Ray Naylor, et al. The case is still pending. Other
than said case, and except as noted under the heading Frederick Case Settlement,
as detailed in the Company's 1999 Annual Report, as amended, 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 have been no changes in the Company's securities since March 31,
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 June 30, 1999.
ITEM 5.
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: September 13, 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: September 13, 1999
/ss/KENNETH D. ROZNOY
Kenneth D. Roznoy
Vice President
