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/AII
[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. ("TVCN")
(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 TVCN'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) . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Operations for the Three
ending June 30, 1999 (unaudited). . . . . . . . . 4
Statements of Cash Flow for the Three
months ending June 30, 1999(unaudited). . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 8
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;
50,835,954 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
=============== ==============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. ("TVCN") AND SUBSIDIARIES
Notes to Financial Statements
June 30, 1998 and 1999 (Unaudited)
Summary of Significant Accounting Policies
The summary of TVCN's significant accounting policies are
incorporated by reference from TVCN's Annual Report on Form 10-
KSB/A, as amended, for Fiscal Year ending March 31, 1999.
The accompanying unaudited consolidated financial
statements include the accounts of TVCN, 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 TVCN'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 TVCN.
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, TVCN 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. TVCN 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 TV ("WCTV") Operations
Our main business activities since inception in
1987 has been obtaining TV channel leases, and the acquisition
and the development and sale of Wireless Cable TV (WCTV)
licenses and stations. The development of Wireless Cable TV
stations to their full growth potential requires substantial
capital resources which have not been adequately available to us.
As a result we have been able to only partially develop
certain of the stations, while holding other stations
and/or licenses without development, and selling such stations
and/or licenses to potential buyers at a profit.
Currently, TVCN is operating a WCTV station in Salina, KS,
and San Luis Obispo, CA. Additionally, we are leasing the WCTV
stations in Mobile, AL and Woodward, OK to non-affiliated
entities. These stations have a limited number of TV channels and
subscribers. The revenues generated from these stations are very
limited and are not sufficient to cover our expenses. Neither
the revenues nor the number of TV channels of the operating Wireless Cable TV
stations are expected to increase materially any time soon.
We also have a small (four-TV channels) wireless station in Hays, KS,
which is not producing any revenues. In cooperation with our
affiliate, Multichannel Distribution of America ("MDA"), Inc.,
TVCN has constructed four-channel WCTV stations in Myrtle Beach,
SC, and Scottsbluff, NE. MDA is owned and controlled by TVCN's
president. For more detailed information, see "Wireless Cable TV
("WCTV") Operations in TVCN's amended 10-KSB/A for the period
ended March 31, 1999.
TVCN is involved in a three-way transaction with our
affiliate, Multichannel Distribution of America ("MDA"), and
Heartland Communications of Plano, TX (now known as NUCENTIX
Broadband). Under the transaction, we acquired a four-TV channel
station in Quincy, IL from MDA for the issuance of 8,507,460
restricted shares of our common stock to MDA, and subsequently assigned and
transferred the station and its license to Heartland. In exchange for the
assignment and transfer, among other things, we acquired from Heartland the
right to obtain additional TV licenses in Salina, KS.
The transaction went on public notice by the Federal Communications Commission
("FCC") on May 26, 1999, and is pending FCC's approval (see the section
"Quincy, Illinois and Salina, Kansas" in the amended 10-KSB/A for the period
ended March 31, 1999).
In 1996, the FCC divided the country into Basic Trading
Areas ("BTAs"), and conducted an auction to sell certain rights
under the Wireless Cable frequency spectrum in which winners
were given the right to obtain the licenses for all parts of the
vacant commercial WCTV spectrum within the Basic Trading Areas.
Our company participated in the FCC auction and won the right to
12 BTAs throughout the USA (see "The FCC Spectrum Auction" in TVCN amended 10-
KSB/A for the period ended March 31, 1999).
The construction, development and operation of Wireless
Cable TV stations requires substantial financial
resources. We have not yet finalized our plans with respect to the
development of stations in these BTAs. The development is
dependent on our ability to obtain substantial capital
resources. There is no assurance that we will obtain
sufficient financing to develop such stations. In the meantime,
we will attempt to sell our rights and interest in the BTAs
and its existing Wireless Cable stations. There can be no assurance
of success.
Historically, Wireless Cable stations have been limited to
a one-way Transmission; broadcasting cable TV programming over the air to
potential subscribers. However, in October, 1998, the FCC changed
its rules so that it allowed the use of the channels for
two-way communications. Using the concept of "cellular phone" or
"cellular communications", the frequencies can now be used
for two way communications connecting customers directly with
long-distance telephone networks, circumventing local telephone
lines.
As a result, long-distance telecommunications companies such
as Sprint and MCI Worldcom began to acquire WCTV companies.
Based upon the foregoing, we believe that this might be an
opportune time to sell our Wireless Cable TV stations, licenses and rights and
interest in the BTAs. TVCN has approximately 1.1 million
households in its markets. We have contacted Sprint, MCI
and others about the possibility of selling Wireless Cable assets.
It is impossible to predict as to the outcome of such an effort.
Reema International Corp.
Reema International Corp. (Reema) is a wholly-owned
subsidiary of TVCN. It was incorporated in 1993 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. This process is better known as Gas-To-Liquid ("GTL").
For more information, see TVCN's 1999 Annual Report, as amended,
on Form 10-KSB/A for the period ended March 31, 1999.
Through Reema, TVCN signed an agreement with the government
of Trinidad and Tobago, Latin America, for the purpose of
constructing and operating a Gas-To-Liquids plant in Trinidad. The proposed
plant is expected to convert about 100 million cubic feet per day
of natural gas into approximately 10,000 barrels per day of
diesel, jet fuel, naphtha and other specialty products. The
capital cost of the plant is estimated at $300 million. We are
discussing with various financial institutions obtaining the
necessary financing for the plant. We are also discussing with
different entities the possibility of entering into a partnership
agreement for the purpose of financing and implementing the
proposed Gas-To-Liquids plant. While the discussions are ongoing, it is too
premature to predict the outcome of such discussions. Although we intend to
focus our future activities on the gas project, there is no assurance that we
will succeed in obtaining the necessary financing or entering into any
partnership agreement with any entity.
Internet Business Opportunities
On February 16, 1996 TVCN incorporated its wholly-owned
subsidiary, Planet Internet Corp. as an Internet Service
Provider. Planet Internet provided internet service to
subscribers. By March 31, 1999, Planet had 836 subscribers, and
was running a negative cash flow of about $40,000 per month. On
May 18, 1999, TVCN signed an agreement to sell certain assets with
the purchaser "BeWell Net Corp." of Parker, CO assuming certain
Liabilities of Planet Internet Corp. The net sale price was
$1,508,640 payable in common stock of BeWell Net. Accordingly,
we received 301,728 shares of the common stock of BeWell Net
valued at $137,170 which reflects the carrying value of the
net assets of Planet Internet while deferring the gain of $466,286
until realized. TVCN has allocated but has not transferred yet
80,000 shares to various employees as performance bonuses.
The 301,728 shares of BeWell Net represents 3.85% of the total
issued and outstanding shares of BeWell Net's common stock.
BeWell Net is a private company and has no public trading market
for its stock. TVCNcontinued to assume certain debt
responsibilities of Planet in the amount of $53,515. The sale
was completed in August, 1999, and accounted for as an investment
in BeWell Net stock.
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. We attempted to sell InterOmni, but the
sale did not go through. We have ceased any further
development in InterOmni.
Revenues
During the period ended June 30, 1999, TVCN 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 revenues for the first quarter ended June 30,
1999, were $220,925 as compared to $655,821 for the first
quarter ended June 30, 1998. The decrease was due to the sale
of TVCN'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
TVCN realized a net gain of $224,290 from the sale of its
real estate property.
Liquidity and Capital Resources
TVCN initially financed its growth through private loans
and private financing. TVCN 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, TVCN has not engaged in any debt financing,
with the exception of the BTA's funding through the FCC, and the
purchase of the internet equipment which will be assigned and
transferred to BeWell Net as part of the sale of Planet. The
lease underlying such equipment will also be transferred to and
assumed by BeWell. TVCN'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 for $2.0 million, and the sale of other assets have been
adequately covering TVCN's liabilities along with allowing TVCN
develop other wireless cable TV markets in the United States and
explore other business opportunities domestically and
internationally.
Currently, TVCN 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.
TVCN's current assets and liabilities are $1,114,876
and $956,471, respectively. TVCN's cash position is such
that management anticipates no difficulty in its ability to meet
its current obligations. TVCN currently has investments
of $165,105 in government securities.
Accounts Receivable and Payable
In connection with the sale of the Detroit system, all
payments and notes underlying the sale have been paid to TVCN
except one note receivable in the amount of $2.4 million which
is due by December 30, 2000. Thus the decrease in notes
receivable as of June 30, 1999 is due to the receipt of note
payments.
The increase in assets and decrease in liabilities were
the result of the sale of TVCN's real estate and Planet
Internet.
Advance from Stockholders
The president of TVCN continued to advance loans to
TVCN. As of June 30, 1999, these loans totaled
$1,087,390.
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, and is not
expected to be paid within the next 12 months.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In connection with its past investment in mining
operations, TVCN 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 TVCN's 1999 Annual Report, as amended, for the
period ended March 31, 1999 TVCN knows of no material litigation
pending, threatened or contemplated, or unsatisfied judgment
against it, or any proceedings in which TVCN is a party. TVCN
knows of no material legal actions pending or threatened or
judgments entered against any officers or directors of TVCN in
their capacity as such in connection with any matter involving
TVCN or the business.
ITEM 2. Changes in Securities
There have been no changes in TVCN'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.
Exhibits (previously filed with the Commission and incorporated by
this reference)
3.1 Copy of Certificate of Incorporation of the corporation
(incorporated by reference to the Exhibits filed with the
Registration Statement dated September 28, 1987. File No.
33-16113-D), which was amended on March 23, 1989, and on
December 17, 1994. The amended copies were filed with the
Commission on or about such dates.
3.2 Copy of By Laws of the corporation (incorporated by
reference to the Exhibits filed with the Registration
Statement dated September 28, 1987, file No. 33-16113-D).
10. Material Contracts (filed with the 10-KSB/A for 3-31-1999
period)
10.1 Memorandum of Understanding (page 1)
10.2 Acquisition Agreement (page 13)
21. Subsidiaries of the Registrant (found on Page 22 of the
Exhibits that were filed with the 10-KSB/A for 3/31/99
period)
27. Financial Data schedules were also filed with the 10-KSB/A
on 9/9/1999 for the period ended 3/31/1999.
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. ("TVCN")
/ss/KENNETH D. ROZNOY /ss/OMAR A. DUWAIK
Kenneth D. Roznoy, Vice President Omar A. Duwaik, President
Date: September 13, 1999
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