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, 2000
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: 68,469,788 shares of TVCN's Common Stock ($.0005 par value)
were outstanding as of June 30, 2000.
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30, 2000
(unaudited) and March 31, 2000. . . . . . . . . . 3
Consolidated Statement of Operations for the Three
ending June 30, 2000 and 1999 (unaudited) . . . . 4
Statements of Cash Flow for the Three
months ending June 30, 2000 and 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, 2000
<TABLE>
<CAPTION>
Unaudited Audited
Jun. 30, 2000 Mar. 31,2000
_____________ ____________
<S> <C> <C>
Current Assets:
Cash $ 740,957 $ 1,147,712
Investments 1,969,194 2,188,477
Accounts Receivable 6,330 6,855
Inventory 73,400 88,017
Notes Receivable 37,550 37,600
Deferred income taxes 119,585 119,585
Other Current Assets 79,628 74,597
____________ ___________
Total Current Assets $ 3,026,644 $ 3,662,843
Property and Equipment-Net $ 672,953 $ 715,945
Property and Equipment, net
Discontinued operations 191,517 207,018
____________ ____________
864,470
Other Assets:
License Agreements - Net 1,347,812 1,196,726
Deferred income taxes 1,569,133 1,436,652
Other assets 80,446 80,504
Reclamation bonds disc.
operations 42,183 42,183
____________ ____________
Total Other Assets $ 3,039,974 $ 2,756,065
____________ ____________
Total Assets $ 6,930,688 $ 7,341,871
============ ============
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unaudited Audited
Jun. 30, 2000 Mar. 31, 2000
______________ ______________
<S> <C> <C>
Current Liabilities:
Account Payable $ 124,638 $ 182,879
Accounts Payable-discont.
operations 97,741 97,741
Accrued Expenses 467,871 465,259
Current portion of
Long-Term Debt 197,322 199,174
Current maturities of Long
Term Discon. 37,500 37,500
Subscribers Deposits 6,005 5,885
______________ ______________
Total Current
Liabilities $ 931,077 $ 988,438
Long-term Liabilities:
Long-term Debt $ 1,154,032 $ 1,128,789
Advances from
Stockholder 177,746 262,620
_____________ ______________
Total Long-Term Liabilities $ 1,331,778 $ 1,391,409
Total Liabilities $ 2,262,855 $ 2,379,847
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; none issued or
outstanding -0- -0-
Class D preferred stock, $1 par
Value; shares outstanding -0- -0-
Common Stock, $.0005 par value;
100,000,000 shares authorized;
68,469,788 outstanding 34,235 34,235
Additional Paid in
Capital 8,518,039 8,518,039
Accumulated (Deficit) <3,913,254> <3,619,063>
_____________ _____________
Total Stockholders'
Equity $ 4,667,833 $ 4,962,024
_____________ _____________
Total Liabilities and Stockholder's
Equity $ 6,930,688 $ 7,341,871
============= =============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ending June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Jun. 30, 2000 Jun. 30, 1999
________________ _______________
<S> <C> <C>
Revenue-Operations $ 69,117 $ 164,786
Interest Income 36,403 56,139
Total Revenue $ 105,520 $ 220,925
================ ===============
Operating Expenses:
Salaries and Wages $ 88,179 $ 107,382
Programming Fees $ 6,444 9,671
Cost of Goods Sold 27,250 -0-
Mine Development <18> -0-
General and Administrative 541,339 269,065
Depreciation and
Amortization 104,895 142,021
Interest 37,082 59,679
________________ _______________
Total Expenses $ 805,171 $ 587,818
________________ _______________
Operating Income(Loss) $ <699,651> $ <366,893>
Gain on Sale of Real Estate $ -0- $ 224,290
Other Income $ 310,000 $ -0-
________________ _______________
Income (loss) before
income taxes $ <389,651> $ <142,603>
Income Tax Expense
Deferred $ <114,817> $ 48,485
________________ _______________
Net (loss) Income from
continuing Oper. $ <274,834> $ <94,118>
Loss from Discontinued
operations net <19,277> 9,142
of tax benefit of
6,554 and 3,108
________________ _______________
Net Income (Loss) $ <294,111> $ <84,976>
Weighted Average Common
Shares Outstanding 68,469,788 58,835,954
Loss per Share <0.00> <0.00>
================ ===============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TV COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
Three Months Ending June 30, 2000 (Unaudited)
<S> <C> <C>
Unaudited Unaudited
3 Months Ending 3 Months Ending
Jun. 30, 2000 Jun. 30, 1999
______________ ______________
Cash Flow From Operating Activities
Net Income (loss) $ <294,111> $ <180,070>
Adjustment to reconcile net income
(loss) to net cash used in operating
activities -0-
Depreciation and
Amortization 104,895 142,021
Change in certain assets and liabilities
Common Stock -0- -0-
Accounts Receivable 525 22,401
Taxes Payable -0-
Inventory 14,617 -0-
Prepaid Expenses -0- -0-
Accounts Payable <58,241> <40,385>
Accrued Expenses 2,612 <44,308>
Subscriber Deposits 120 <269>
Deferred Gain -0- -0-
Deferred Taxes <132,481> -0-
Other Assets <5,053> 66,388
_______________ ______________
Cash flows used in
operating Activities $ <367,117> $ < 34,222>
Cash Flows From Investing Activities:
Investments $ 219,283 $ <735>
Property & Equipment <46,402> 230,833
Notes Receivable 50 1,300
License Agreements <151,086> -0-
Investing
Other -0- 74,265
_______________ ______________
Cash Flows provided by investing
activities: $ 21,845 $ 305,663
_______________ ______________
Cash Flows From Financing Activities:
Payments of Stockholder
Advances $ <84,874> $ <12,944>
Long-term Debt Net 23,391 <70,953>
_______________ ______________
Cash flows used in financing
Activities $ <61,483> $ <83,897>
_______________ ______________
Net Increase (decrease)
In Cash <406,755> 187,544
Cash - Beginning of
Year $ 1,147,712 $ 462,157
_______________ ______________
Cash - End of
Period $ 740,957 $ 649,701
=============== ==============
</TABLE>
<PAGE>
TV COMMUNICATIONS NETWORK, INC. ("TVCN") AND SUBSIDIARIES
Notes to Financial Statements
June 30, 1999 and 2000 (Unaudited)
Summary of Significant Accounting Policies
The summary of TVCN's significant accounting policies are
incorporated by reference from our Annual Report on Form 10-KSB,
for Fiscal Year ending March 31, 2000.
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, 2000, and June 30,
1999, and the periods then ended have not been audited by our
independent auditors, but, in the opinion of management, reflect
all adjustments (which include only normal recurring adjustments)
necessary for the fair presentation of our operations. The
results of operations for the three months ending June 30, 2000,
and June 30, 1999, 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 68,469,788, and 50,835,954 common shares
outstanding for 2000 and 1999, respectively.
Income Tax
From its inception on July 7, 1987, we have incurred
operating losses through March 31, 1999 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, 2000 $4,200,000 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.
On May 18, 2000, the Company had announced that it had received a
firm commitment from a private investor to invest into Reema's
project in Trinidad the amount of $150 million. This represents
about half of what the Company believes is needed to properly fund
the engineering, procurement and construction of the Gas-To-Liquids
plant.
Because of this commitment, the Company held a press conference in
Trinidad and announced on June 5, 2000 that it had chosen Parsons
Chemical and Engineering Group of Houston, Texas to handle the
Engineering, Procurement and Construction of the Plant. Parsons
is backed with over 11,000 employees and 50 years of experience.
They have constructed over 250 gas processing plants and completed
more than 600 chemical and petrochemical projects throughout the world.
Subsequent to the end of the quarter, on July 31, we further announced
that the same entity had agreed to increase its commitment to
Reema for the full $300 million that we believe is necessary to build
the first plant. While Reema has received a committment for funding,
Reema has not received any funds.
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. TVCN
continued 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.
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,
2000, were $105,520 as compared to $220,925 for the first quarter
ended June 30, 1999. The decrease was due to the reduction of lease
income in connectio with the sale of the building.
Operating Expenses
Total operating expenses for the first quarter ended June 30,
2000, are $805,171 as compared to $587,818 during the first
quarter ended Jun 30, 1999. The increase in expenses of $217,353
is summarized as follows:
Decrease in Salaries and Wages $ <19,203>
Decrease in Programming Fees <3,227>
Increase in Cost of Goods Sold 27,250
Increase in Mine Development <18>
Increase in General & Administrative Expense 272,274
Decrease in Depreciation and Amortization <37,126>
Increase in Interest Expense <22,597>
______________
Net increase in total expenses $ 217,353
The decrease in salaries and wages is due to a reduction in
personnel. The decrease in programming fees is due to the
decline of subscribers in both operating systems. The increase
in Cost of Goods Sold is due primarily to JBA Wholesalers. The
increase in General and Administrative Expense is due mainly for
Reema's Consultants and additional engineering for the Trinidad
Project. The decrease in Depreciation and Amortization reflects
the assets sold. The decrease in Interest Expense is due to the
sale of the corporate building and elimination of the related
mortgage.
Liquidity and Capital Resources
TVCN initially financed its growth through private loans and
private financing. We will finance our 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, we have 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 was 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, 2000, and
June 30, 1999, are summarized as follows:
June 30, 2000 June 30, 1999
Unaudited Unaudited
Cash Flow From Operating
Activities $ <367,117> $ <34,222>
Cash Flow From Investing
Activities $ 21,845 $ 305,663
Cash Flow From Financing
Activities $ <61,483> $ <83,897>
Cash - Beginning of Period $ 1,147,712 $ 462,157
Cash - End of Period $ 740,957 $ 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 $1,331,778 in long term debt which is
primarily for the purchase the Basic Trade Area rights purchased
during the FCC BTA Auction, and for equipment purchases.
TVCN's current assets and liabilities are $3,026,644 and
$931,077, 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 $69,182
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.
Thus the slight decrease in notes receivable as of June 30, 2000
is due to the further reduction of note payments.
The decrease in assets is due primarily to the sale of
certain assets in the previous fiscal year and the decrease in
liabilities is the result of the sale those same assets.
Advance from Stockholders
The president of TVCN has had to advance loans to the
Company in its early years. As of June 30, 2000, these loans
totaled $177,746. Mr. Duwaik bought 81,200 shares from the open
market in May and June, and the Company paid him back to reduce
the loans owed to him. Form 4 was filed by him concerning his
purchases.
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 2000 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
January 4, 2000.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security
Holders
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
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.
99.1(P) Copy of a report by Houlihan Valuation Advisors titled
"Valuation of a 10,000,000 Shares Block of Restricted Common Stock
of TV Communications Network, Inc. as of March 25, 1998." Filed
on 6/27/2000.
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/OMAR A. DUWAIK
Omar A. Duwaik, President,
CEO & Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the date indicated:
/S/OMAR A. DUWAIK /S/KENNETH D. ROZNOY
Omar A. Duwaik, President, Kenneth D. Roznoy,
CEO & Director Vice President & Director
/S/ JACKIE PORTER
Jackie Porter
Acting Controller
Date: August 14, 2000
